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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission file number 0-23214
SAMSONITE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-3511556
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
11200 East 45th Avenue
Denver, Colorado 80239
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 373-2000
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in part III of this Form 10-K or any
amendment to this Form 10-K. X
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As of April 7, 1997, the registrant had outstanding 20,349,708 shares
of Common Stock, par value $.01 per share. The aggregate market value of such
Common Stock held by non-affiliates of the registrant, based upon the closing
sales price of the Common Stock on April 7, 1997, as reported on the Nasdaq
National Market was approximately $419.2 million. Shares of Common Stock held by
each officer and director and by each person who owns 5 percent or more of the
outstanding Common Stock have been excluded in that such persons may be deemed
to be affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X No
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INDEX
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PART I Page
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Item 1. Business............................................................... 3
Item 2. Properties............................................................. 14
Item 3. Legal Proceedings...................................................... 14
Item 4. Submission of Matters to a Vote of Security Holders.................... 14
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.. 15
Item 6. Selected Financial Data................................................ 16
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................ 19
Item 7A. Quantitative and Qualitative Disclosures about Market Risk............. 27
Item 8. Financial Statements and Supplementary Data............................ 27
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure............................................. 27
PART III
Item 10. Directors and Executive Officers of the Registrant..................... 28
Item 11. Executive Compensation................................................. 31
Item 12. Security Ownership of Certain Beneficial Owners and Management......... 45
Item 13. Certain Relationships and Related Transactions......................... 48
PART IV
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K........ 49
Signatures ....................................................................... 50
Index to Consolidated Financial Statements and Schedule................................. F-1
Exhibit Index........................................................................... E-1
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PART I
ITEM 1. BUSINESS
GENERAL
Samsonite Corporation (the "Company") is one of the world's largest
manufacturers and distributors of luggage. The Company markets its products
primarily under the Samsonite(R), American Tourister(R) and Lark(R) brand names.
The Samsonite brand enjoys worldwide recognition and is the leading brand of
luggage products in the United States and Europe. American Tourister is the
second most recognized brand of luggage in the United States. Following the
Company's acquisition of American Tourister in 1993, the Company introduced the
American Tourister brand in Europe. The Lark brand is well-recognized in the
United States and competes in the premium segment of the luggage market.
Samsonite and American Tourister luggage products have been manufactured and
sold continuously since the 1930's.
The Company's fiscal year ends on January 31 and references to a
fiscal year denote the calendar year in which the fiscal year ended; for
example, "fiscal 1997" refers to the 12 months ended January 31, 1997.
With sales of $741.1 million for fiscal 1997, the Company is a major
factor in the worldwide luggage market. Competition in the luggage market is
highly fragmented with the vast majority of individual competitors having less
than 10% of the Company's annual luggage sales. Samsonite offers the broadest
range of products in the luggage industry, including hardside suitcases,
softside suitcases, garment bags, casual bags, hardside and softside business
cases and other travel bags. Many of today's most successful luggage products
and features-such as suitcases with a built-in luggage cart; full- featured,
structured garment bags; ultra-light, softside suitcases; and innovative wheel
systems-were introduced or popularized by Samsonite. Hardside suitcases
accounted for approximately 32% of the Company's sales in fiscal 1997. As a
result of recent improvements in Samsonite's proprietary molding technology and
design, the Company now offers consumers who prefer the greater protection and
security of hardside luggage, hardside suitcases that are lighter in weight and
comparable to softside products in terms of interior organization features.
Softside products (excluding business cases), which accounted for approximately
54% of the Company's sales in fiscal 1997, appeal to consumers because of their
light weight, flexibility and convenience for a variety of purposes.
The Company's products are sourced through a global network consisting
of 11 Company-operated manufacturing facilities and various third-party
suppliers throughout the world. By operating its own facilities to produce
hardside luggage and more complex softside products, the Company is better able
to control manufacturing quality and to achieve shorter product introduction
lead times and lower delivery costs. In addition, the Company takes advantage of
its global sourcing capabilities by opportunistically buying basic products from
various countries when their product costs or exchange rates are particularly
favorable. The Company produces substantially all of its hardside products in
Company-operated plants in the United States, Belgium and France. Approximately
60% of the Company's softside products are sourced from qualified vendors
located principally in the Far East, Eastern Europe and the Dominican Republic,
with the balance produced by the Company in the United States, Belgium, Italy,
Mexico, Spain and Hungary.
The Company's marketing and distribution strategy focuses on the broad
middle segment of the luggage market. In the United States, the Samsonite brand
has historically been positioned as high quality, innovative luggage, targeted
at frequent business travelers; the American Tourister brand has been positioned
as quality luggage at an affordable price; and the Lark brand has been
positioned as premium luggage targeted at first and business class travelers. In
Europe, the Samsonite brand enjoys more of a premium image than in the United
States, and is targeted at first class and frequent business travelers.
The Company's products are sold throughout the world in more than 100
countries through approximately 23,000 retail outlets, including department and
specialty stores, catalog showrooms, mass merchant retailers and warehouse
clubs. As of January 31, 1997, the Company also distributed products through 149
Company-owned retail stores in the United States and two Company-owned premium
luggage stores in Europe. In addition, Samsonite licenses its trademark for use
on non-luggage products such as travel accessories, personal leather goods,
handbags and furniture. These products are made and sold primarily
by independent licensees which pay royalties to Samsonite.
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BUSINESS STRATEGY AND NEW GROWTH INITIATIVES
Management believes that the Company's leading position in the global
luggage industry is due to its widely recognized brand names, broad range of
innovative luggage products and global manufacturing and distribution network.
In addition, the substantial cash flow generated by the Company is available for
investments in product development, advertising and marketing.
With the hiring of a new chief executive officer in May 1996, the
Company began implementation of a series of strategic initiatives intended to
improve Samsonite's economic performance and strengthen its leadership position
in the worldwide luggage market. The Company's key strategies to increase
revenue and net income and realize the full potential of Samsonite's global
brands include the following:
. Improved Management Team and Organizational Structure. Samsonite has
formed a new management team which consists of Company veterans with extensive
luggage experience and new managers who have broad experience in the marketing
of branded consumer products as well as successful track records at other
globally branded consumer products companies. See "Directors and Executive
Officers of the Registrant." This management team is now leading a more
streamlined and effective category-based organization. This organizational
structure is designed to manage the Company's business around two product
categories - hardside and softside luggage - as opposed to focusing separately
on the Company's three key brands. In the Americas, these categories are
supported by a separate sales and distribution function.
. Improve the Cost Structure and Work Practices. Samsonite is making
further changes which will reduce staffing levels as well as improve systems
and controls to reduce costs, while achieving greater effectiveness. During
1996, the Company implemented two restructuring programs designed to achieve
the consolidation of American Tourister and to effect other consolidations and
staffing reductions relating principally to the change to a category-based
management structure. Management estimates that these restructurings will
yield approximately $16 million of annual cost reductions by the fourth
quarter of fiscal 1998. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations." In addition, the Company has created a
new organization for sourcing products and raw materials on a global basis
and is in the process of standardizing products and components worldwide.
These sourcing and standardization actions are designed to simplify operations
and are expected to yield additional cost reductions.
. Develop a New, Integrated Global Product and Pricing Architecture.
The Company has developed a new global product and pricing architecture which
it believes will provide a more complete assortment of consumer-preferred
products, features and styles at a broad range of price points for each key
channel of distribution in each major market throughout the world. The new
product and pricing architecture largely represents an adaptation of
Samsonite's successful European product line-up which includes more upscale
product offerings. This strategy is designed not only to improve the Company's
margin structure, but also to strengthen the premium brand image of the
Samsonite brand, particularly in North America. As part of the new product
architecture, Samsonite will offer a wider array of style-coordinated hardside
and softside luggage products. Further, by using a simpler, more uniform
global product architecture, the Company will be able to shorten product cycle
times, which will permit innovations to be introduced more rapidly throughout
the Company's worldwide markets. For example, during fiscal 1997, Samsonite
introduced the EZ CART (TM) suitcase, a new concept in softside luggage, in
the United States simultaneously across the Samsonite, American Tourister and
Lark brands. This new product is an upright, softside suitcase with a
balanced, four-wheel system designed to be more maneuverable with less effort,
and to take the weight off the traveler's arm and transfer it to the floor.
The EZ CART (TM) product is expected to be introduced in Europe and the Far
East within the next six to nine months; and a carry-on size is expected to be
introduced in the United States.
. Accelerate Sales Growth. In addition to exploiting Samsonite's new
global product architecture to more quickly and cost effectively introduce new
consumer-preferred features and product designs across all brands worldwide,
the Company has developed a number of additional initiatives intended to
accelerate profitably the Company's revenue growth:
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Expand Product Offerings In Casual and Business Bag Segments. The
new global product architecture includes more entries in casual bags and
business cases to expand the Company's sales in these two growth categories.
This strategy has already proven to be successful for Samsonite in Europe and
Japan.
Strengthen Marketing. Samsonite plans to expand its presence in
the worldwide luggage market from both a consumer and trade standpoint through
improved consumer marketing. This marketing program is intended to include
more consumer-preferred products, styles and features, more effective global
advertising at higher investment levels, strengthened point-of-sale support
and better customer service. In connection with its shift to a category-based
management structure, for the first time in November 1996, advertisements
introducing the EZ CART (TM) suitcase in the United States identified
Samsonite, American Tourister and Lark as a family of brands, each offering a
version of this innovative new product.
Broaden Channels of Distribution. The Company plans to increase
its presence in channels of distribution in which it believes it is under-
represented by using targeted marketing and sales efforts tailored to each
channel of distribution. In addition, the Company intends to exploit its
manufacturing and sourcing leverage by aggressively pursuing opportunities to
sell American Tourister products in mass retailers and other high volume
potential channels throughout the world.
Continue Worldwide Expansion. The Company plans to continue
expansion worldwide in countries where growing economies and reduced political
and trade barriers provide opportunities for long-term growth. Samsonite
currently is expanding its presence in emerging foreign markets, including
markets in China, India, South America and the Pacific Rim. In the first
quarter of fiscal 1997, a joint venture with a local partner to distribute
Samsonite products in Singapore and Malaysia began operating successfully. In
addition, through joint ventures with local partners in India and China, the
Company plans to manufacture and distribute Samsonite products in these
countries beginning in fiscal 1998. The Company has formed a joint venture
with its Argentine distributor to manufacture and distribute Samsonite
products in Brazil and other major South American markets beginning in fiscal
1998.
Accelerate Company-owned Retail Store Sales Growth. The Company
intends to increase its retail outlets as well as broaden and strengthen its
retail operations. In October 1996, Samsonite began marketing all three of the
Company's key brands throughout its Company-owned luggage stores in the United
States which had previously sold only American Tourister luggage. In addition,
Samsonite is adopting best operational and merchandising practices designed to
reduce costs and increase sell-through. Sales have continued to accelerate in
the Company's retail operations, thereby increasing positive operating cash
flow.
. Improve Return on Equity and Continue to Strengthen the Balance
Sheet. The Company has implemented a comprehensive strategy to reduce leverage
and improve return on equity, including the possible divestiture of various
non-core assets. To better manage working capital, the Company has negotiated
new extended payment terms with most of its major vendors, and is accelerating
the collection of accounts receivable and reducing inventory levels through
SKU reductions, as well as better requirements forecasting. In addition to
the reduction of debt by $20.3 million in fiscal 1997, the Company has reduced
debt by approximately $128 million in February 1997 as the result of the
completion of a public stock offering. The Company expects these actions,
combined with the other strategic initiatives, to result in lower interest
costs and an improved return on equity in fiscal 1998.
THE LUGGAGE MARKET
The worldwide luggage market covers a wide range of products, values
and price points. At the highest end of the market are luxury products (such as
LouisVuitton and Gucci) that have prestige identities and high prices. Beneath
the luxury segment is the broad middle band of the luggage market in which
products are differentiated by features, brand name and price. Within this band,
unit sales volumes are largest at the middle and lower prices and product
differentiation decreases with price level.
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At the low end of the luggage market, unbranded products with few, if any,
differentiating features are sold in significant volumes and at low margins,
competing primarily on the basis of price.
In the United States, luggage is sold to consumers through (i)
traditional retail distribution channels, including department and specialty
luggage stores; (ii) catalog showrooms; and (iii) discount retail distribution
channels, including mass merchants, warehouse clubs and factory outlet stores.
As of January 31, 1997, Samsonite operated 149 Company-owned retail stores in
the United States. These stores, which previously focused on selling American
Tourister brand products, recently have started selling all three of Samsonite's
primary brands. Samsonite's sales in the United States increased by 13.6% in
fiscal 1997 compared to fiscal 1996.
In Europe, luggage is sold to consumers primarily through traditional
distribution channels. In the European discount channels, the Company is
distributing several product lines, including its American Tourister brand.
Samsonite's sales (expressed in local currency) in Europe increased 8.8% in
fiscal 1997 compared to fiscal 1996.
PRODUCTS
The Company offers the broadest range of products in the luggage
industry, including hardside suitcases, softside suitcases, garment bags, casual
bags, hardside and softside business cases and other travel bags. Hardside
suitcases and business cases typically consist of a two-piece rigid plastic
shell held together by a hinge. The plastic shells for hardside cases are made
by injection molding or vacuum forming, some of which use Samsonite's
proprietary technology and designs. Softside suitcases and structured garment
bags are constructed of a flexible fabric stretched over a rigid frame. Garment
bags are designed to hold hanging garments, such as suits and dresses, and can
be opened while hanging up. Casual bags include duffle bags and other bags that
do not have a rigid frame. Business and attache cases are constructed of both
softside or hardside materials. The following table sets forth the percentage of
the Company's fiscal 1997 revenues from sales of luggage and travel-related
products by product type:
Softside suitcases...................... 35%
Hardside suitcases...................... 32
Casual bags (softside).................. 10
Garment bags (softside)................. 9
Business cases (hardside and softside).. 4
Other products (primarily non-luggage).. 10
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100%
===
The Company sells a full range of luggage products under each of its
Samsonite, American Tourister and Lark brand names. Although the positioning of
the Company's brands and its target consumers vary somewhat from market to
market, the Company generally markets its brands to four consumer segments:
premium, business, leisure and discount. Product lines within each brand are
designed to appeal to targeted consumer groups. The following table sets forth,
for each of the Company's principal luggage brands, its historical market
position and targeted consumer in the United States and Western Europe.
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Brand Name Market Position Target Consumer
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Samsonite Top quality luggage with consumer-preferred features (also Business/frequent traveler (also
positioned as premium luggage with attractive styling in premium traveler in Western Europe)
Western Europe)
American Tourister High quality luggage offering contemporary and casual Active traveler/"youthful" lifestyle
designs for active or younger lifestyles and extra features
Lark Premium luggage for upscale consumers with luxurious First and business class traveler
styling and best features
Other brands Branded luggage for price conscious Discount luggage consumer
consumers
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During the fourth quarter of fiscal 1997, the Company adopted a category
management organizational structure in order to better focus on the various
segments of consumer needs. This organizational structure is intended to
facilitate management of the Company's business around two product categories -
hardside and softside luggage. In the Americas, these categories are supported
by a separate sales and distribution function. Category-based management will
help to better identify and implement operational, marketing and cost
improvements across all Samsonite's brands simultaneously.
As a result of its development and implementation of a new product and
pricing architecture, Samsonite has begun introducing globally new hardside and
softside products in order to provide a more complete assortment of product
offerings at a broad range of price points. In addition, the Company's new
product architecture offers style coordinated pieces of hardside and softside
luggage and casual bags so that the consumer can select from both types of
luggage with matching or complementary styling. The new architecture focuses on
the Company's primary brands, Samsonite, American Tourister and Lark, while
reducing emphasis on many of the secondary names previously in use (such as
Samsonite Silhouette, American Tourister Paradigm and Samsonite Epsilon). Thus,
consumers will have a broader selection of improved luggage products, will be
able to coordinate hardside and softside pieces of luggage to meet their travel
needs, and will select their Samsonite, American Tourister or Lark product from
a portfolio offering a wider spectrum of prices, features and styling levels.
Hardside Luggage. The Company manufactures virtually all of its
requirements for hardside luggage in its own factories. Hardside luggage is sold
under the Samsonite brand globally; in the United States, it is also sold under
the American Tourister brand. Hardside luggage products provide greater
protection and security than softside while offering similar features to assist
interior organization and packing and enhance mobility and portability. These
features reflect the results of extensive market research and consumer testing
to determine the approaches to best meet consumer needs. Both in Europe and in
the United States, hardside products are offered in several lines, each
including a variety of sizes and styles of hardside luggage pieces with
differing features.
In Europe, premium suitcases may sell at retail for up to US$500 per
suitcase. Some of the popular Samsonite-branded hardside lines in Europe include
the Samsonite System 4 Deluxe and System 4 Art lines, both priced at the higher
end of the market, the Samsonite Epsilon(R) lines priced in the upper-middle
range of the luggage market, and Samsonite Oyster products priced in the
lower end of the middle of the market. In the United States, the Samsonite-
branded hardside products include the Silhouette(R) series in the upper-middle
range of the market and the lower-priced Epsilon(R) products. In the Americas,
Samsonite plans to reintroduce the Oyster products at the lower end of its
market, to reposition Epsilon(R) products to the middle of the pricing structure
and to introduce a higher end line positioned similar to its European System 4
Deluxe products. As a result, Samsonite's product and pricing architecture in
the Americas will be similar to its successful European architecture. Product
names are being converted to a numbered series (e.g., the System 4 Deluxe will
become "Samsonite Series 900").
Globally, Samsonite distributes and sells hardside suitcases which include
features to facilitate transport. These include the patented Piggyback(R)
product which incorporates a luggage cart, an extendable handle and a strap
allowing additional bags to be attached and transported. As a result of
proprietary improvements in molding technology and design, Samsonite is
introducing new hardside luggage which incorporates lighter weight and improved
interior organization features. The Company will be introducing a hardside
suitcase incorporating the four-wheel upright design features from the Company's
new EZ CART (TM) softside suitcase.
Softside Luggage. The softside luggage category includes suitcases, garment
bags (both structured and unstructured), softside business cases, casual bags,
and duffels. The Company sources more than half of its requirements for softside
luggage and other bags from numerous independent suppliers located worldwide,
and produces the balance of its requirements in its own facilities located in
several countries. As with the hardside products, the Company has introduced a
number of innovative features in its softside products in response to consumer
needs for better interior organization, ease of use, mobility and portability.
The softside products are sold under all of the Company's major brands,
Samsonite, American Tourister, Lark and some secondary brands. Globally, the
softside products are grouped into product lines with a variety of matching or
complementary suitcases, garment bags and other bags.
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The softside luggage products include many consumer-preferred features. The
Samsonite Ultravalet(R) garment bag provides many separate pockets to facilitate
organization of clothing and a reverse folding feature to reduce wrinkling of
clothing on hangers. The Ultravalet(R) garment bag has been introduced with an
extendable handle and wheels to provide an Ultravalet "Garment Bag with Wheels"
incorporating its own transport system. American Tourister's Paradigm(R) line
features a pullman suitcase with a patented "Easy Turn(R)" center mount wheel
system making the suitcase less likely to overturn while in motion. The Paradigm
suitcase also features attractive styling, sophisticated internal design, and
generous capacity to facilitate organization and packing of contents. In 1996,
American Tourister introduced its Cadence product with the patented Tourister
Carry System allowing the upright suitcase to be the foundation for conveying on
wheels other pieces of luggage in a secure and stable manner. Samsonite has
introduced an ultralite line of softside products, providing the features
desired by consumers in a lighter weight design.
The Lark brand in the United States, positioned for the premium market,
includes a full line of softside suitcases, garment bags, and casual bags with
top quality materials, some of the best features found in the Company's other
product lines, as well as some additional features. The Lark products
incorporate brass-plated hardware, leather trim and handles, and luxurious
fully-lined interiors for an elegant appearance.
During fiscal 1997, Samsonite introduced the EZ CART (TM) suitcase, a new
concept in softside luggage, in the United States simultaneously under the
Samsonite, American Tourister and Lark brands. The new product is an upright,
softside suitcase with a balanced, four-wheel system designed to be more
maneuverable with less effort, and to take the weight off the traveler's arm and
transfer it to the floor. The EZ CART (TM) product has a shelving feature to
allow the suitcase to be packed and used upright, and includes a "suiter" for
transporting suits or dresses on hangers, a retractable handle design so the
suitcase can be maneuvered by pushing or pulling and a means to attach other
bags for transporting.
Product names for softside luggage products are also being converted to the
same numbered series to assist consumer understanding of product features and
values.
Other Luggage Brands. Samsonite utilizes its global manufacturing and
product sourcing leverage to compete in the high-volume, discount channels of
retail distribution by marketing luggage products under a number of secondary
brands and retailer-labels. These hardside and softside luggage products are
generally lower-priced than the Company's Samsonite, American Tourister, and
Lark products, and usually provide fewer features. Samsonite's secondary brands
include Magnum and Royal Traveler in Europe, Tauro in Spain, and Azzura and
Bogey in Italy. Samsonite also plans to expand the uses of the American
Tourister brand in the mass merchant and discount channels.
Licensed Products. The Company licenses its brand names to third parties
primarily for the sale of non-luggage products. In addition to the licensed
Samsonite and American Tourister brand products, such third parties generally
distribute other, non-Samsonite products. Currently, licensed products
distributed by the Company or by third party licensees include furniture
products, travel accessories, photo and audio storage gear, personal leather
goods, ladies handbags, tool organizers, umbrellas, binoculars, pet carriers and
juvenile products. Revenue from royalties for licensing the use of Company-owned
brand names (including apparel brands) totaled approximately $20.5 million in
fiscal 1997.
New Product Design and Development. The Company devotes significant
resources to new product design and development. Most of the Company's products
have either been introduced or substantially redesigned since 1990. The Company
uses market research to identify consumers' luggage needs and then develops
product features that are intended to address these needs. The Company has
introduced or popularized many of today's most successful luggage products, such
as suitcases with built-in luggage carts; ultra-lightweight, softside suitcases;
full-featured, structured garment bags; and innovative wheel systems. In fiscal
1997, the Company introduced the EZ CART (TM) suitcase, which has a four-wheel
system designed to be more maneuverable with less effort. The Company believes
the continual development and introduction of products with innovative features
contribute to brand awareness and product differentiation.
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DISTRIBUTION
The Company's products are sold in more than 100 countries throughout the
world through approximately 23,000 retail outlets, including department and
specialty stores, catalog showrooms, mass merchant retailers, warehouse clubs,
149 Company- owned stores in the United States and two Company-owned stores in
Europe. The Company distributes its products through all major distribution
channels in the United States and primarily through traditional distribution
channels in Europe.
North America. The Company sells its Samsonite brand products in North
America primarily through department stores and luggage specialty stores, and
through catalog showrooms and national retailers such as JCPenney, Sears and
Montgomery Ward. The acquisition of American Tourister in 1993 increased the
Company's presence in the discount channels, such as mass merchants, warehouse
clubs and factory outlets, which are becoming increasingly important in the
distribution of luggage. As a result of the strength of its brand names and its
targeted marketing strategy, the Company is able to distribute one or more full
lines of luggage under each of its principal brand names across different
channels of distribution without selling the same product line in more than one
channel. In addition, the Company sells luggage products (known as "exclusive
label" products) designed exclusively for each of a number of department store
and specialty retailing customers and bearing special labels coupled with the
Samsonite brand name.
The following table sets forth the percentage of the Company's United
States revenues by distribution channel for fiscal 1997:
Department/specialty stores........................... 44%
Company-owned stores.................................. 22
Exclusive label....................................... 15
Catalog showrooms..................................... 10
Mass merchants........................................ 6
Warehouse clubs....................................... 3
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100%
===
In September 1996, as part of its category-based management structure,
Samsonite formed a separate sales and distribution organization to improve the
focus of all sales and distribution efforts in the United States and Canada. The
new organization includes all sales, product warehousing and distribution, sales
planning and forecasting functions, as well as Samsonite's retail stores and
Samsonite's Legacy division (which markets luggage products to discount
channels). As a result, all relations with customers are focused within one
organization.
The Company has a direct sales force of approximately 75 persons that
serves approximately 10,000 stores in the United States. In coordination with
its key customers, the Company develops exclusive label product lines,
coordinates promotional strategies and establishes merchandise resupply
objectives. The Company employs electronic order gathering and fulfillment
systems that enhance the Company's level of customer service. Combined with
automatic electronic order entry, these systems can increase sales by minimizing
stockouts at the retail level, help the retailer reduce inventory holding and
purchasing costs, and increase inventory turnover. Over 60% of Samsonite luggage
sales in the United States are derived from orders received through this
electronic system.
As of January 31, 1997, the Company operated 149 retail stores in the
United States, making it one of the largest luggage retailers. Operating its own
retail outlets allows the Company to test-market new luggage and to more
efficiently reduce excess inventory positions. Additionally, the Company plans
to use its retail stores to test-market travel accessories and non-luggage
products that it may produce and/or distribute as part of its licensing efforts.
Europe. The Company distributes its Samsonite brand products in Europe
through specialty luggage stores and department stores. Samsonite brand products
are generally not distributed through the discount retailers in order to
preserve the premium image of the Samsonite brand in Europe. The Company's
American Tourister brand has been introduced in Europe to help balance the
Company's retail distribution in each of the primary retail channels and is
being used to establish a single pan-European brand name in the discount
channel.
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The Company services over 11,000 stores in Europe through a direct sales
force and product demonstrators of approximately 120 persons which transmits
orders by computer to a central distribution facility in Belgium. The Company
delivers its products to its European retailing customers through a proprietary
pan-European distribution network developed at the Company's European
headquarters. Orders received electronically from the Company's sales force are
processed centrally in Belgium using specialized software created by the Company
which deals in the national currency of each of the Company's customers, making
it capable of billing customers in their local currency. Its integration with a
centralized shipping facility, electronic order entry and preparation of all
paperwork necessary for multiple cross-border deliveries permits delivery of
products within five days after an order is placed. To complement its direct
sales force, the Company also sells to other European markets through
distributors and agents located in over 20 countries. Such distributors and
agents, as well as those mentioned under "International" below, handle various
non-luggage products in addition to the Company's products. In general, they
sell the Company's products pursuant to agreements whereby they do not handle
luggage other than the Company's products in exchange for the Company's
commitment not to deal with other distributors and agents in their territory.
International. In markets outside the United States and Western Europe, the
Company primarily sells its products directly, through agents and distributors,
and under license. The Company entered the Japanese market in 1964 through a
licensing arrangement with Ace Luggage Company ("Ace"), Japan's principal
luggage manufacturing company. Samsonite brand products made by Ace are sold
primarily in department stores throughout Japan. Products sold in international
markets are shipped from the United States, Western Europe or Asia depending
upon product type, availability and exchange rate. In some instances, the
Company has entered new markets through third party distributors and has
acquired these third party distributors as markets have matured. The Company
currently has joint ventures in Singapore, India, Brazil and China. In India and
China, the ventures are currently building manufacturing facilities and expect
to commence production and distribution of Samsonite luggage in mid fiscal 1998.
The Company has started a joint venture with Samsonite's current distributor in
Argentina, to distribute Samsonite products in Brazil and other major South
American markets in fiscal 1998.
ADVERTISING AND MARKETING
The Company commits substantial resources to aggressive brand advertising
programs that promote the features, durability and quality of the Company's
products and target particular segments of the luggage market based on consumer
demographics. The Company incurred approximately $54 million worldwide for
advertising and other related expenses in fiscal 1997 and has incurred
approximately $40 million per year on average during the last four years. A 1994
market survey conducted by an independent survey organization engaged by the
Company indicated that over 93% and 79% of travelers surveyed in the United
States recognized the Samsonite and American Tourister brand names,
respectively, compared to less than 15% for the next most recognized luggage
brand. This market survey was conducted by asking adults who made at least one
overnight trip during the previous six months to recognize a brand of luggage
when presented with a list of luggage brands. Similar surveys show that
recognition of the Samsonite brand name in most major Western European countries
ranges from 60% to 80%.
The Company's marketing and distribution strategy focuses on the broad
middle segment of the luggage market. In the United States, the Samsonite brand
has historically been positioned as high quality, innovative luggage, targeted
at frequent business travelers; the American Tourister brand has been positioned
as quality luggage at an affordable price; and the Lark brand has been
positioned as premium luggage targeted at first and business class travelers. In
Europe, the Samsonite brand enjoys more of a premium image than in the United
States, and is targeted at first class and frequent business travelers.
Reinforcing the Company's marketing strategy, Samsonite brand advertising
highlights innovative features and benefits of products that meet the needs of
business and frequent travelers. Samsonite advertisements run on television, in
news weeklies and in inflight and business publications during key consumer
purchase periods throughout the year. The Company also helps its retailing
customers coordinate their advertising with the Company's national advertising
campaigns.
The Company's advertising campaign in Europe uses television, print and
billboards to promote an image of high quality and style and highlights the
newest and most innovative products. The Company was the first luggage company
in Europe to use television to advertise and build brand awareness.
-10-
<PAGE>
As part of the implementation of its new strategic initiatives, Samsonite
plans to expand its presence in the worldwide luggage market from both a
consumer and trade standpoint through improved consumer marketing. This
marketing program is expected to include more consumer-preferred products,
styles and features, more effective global advertising at higher investment
levels, strengthened point-of-sale support and better customer service. In
connection with its shift to a category-based management structure, for the
first time in November 1996, advertisements introducing the EZ CART (TM)
suitcase in the United States identified Samsonite, American Tourister and Lark
as a family of brands, each offering a version of this innovative new product.
MANUFACTURING AND SOURCING PRODUCTS
The Company's global sourcing network consists of 11 Company-operated
manufacturing facilities and various third-party suppliers located principally
in the Far East, Eastern Europe and the Dominican Republic. By operating its own
facilities to produce hardside luggage and more complex softside products, the
Company is better able to control manufacturing quality and reduce lead times
and delivery costs. The Company's global sourcing network also enables it to
opportunistically source less complex products from countries with low product
costs and favorable currency exchange rates. Company-operated manufacturing
facilities are located in Belgium, France, Hungary, Italy, Mexico, Spain and the
United States. In fiscal 1997, approximately 59% of the Company's sales revenues
were from products manufactured at its own facilities.
The Company manufactures all of the hardside luggage products that it
distributes. Major hardside production facilities are located in Denver,
Colorado and Oudenaarde, Belgium, with limited hardside production facilities
located in Henin-Beaumont, France. Hardside products are made by molding plastic
resins to form a two-piece shell. Handles, locks and other features are attached
to the shell and the halves are joined by a hinge. In fiscal 1997,
approximately 40% of the Company's revenues from softside luggage products were
from products manufactured at the Company's own facilities. Softside suitcases
are made by stretching a synthetic material over a rigid metal or plastic frame.
Casual bags are made of the same synthetic materials but do not have rigid
frames. The Company employs approximately 6,000 people in the manufacture of
hardside and softside luggage.
The Company sources the remainder of its luggage products primarily from
the Far East, Eastern Europe and the Dominican Republic. The Company believes
that the significant volume of its softside luggage purchases has enabled it to
obtain a reliable supply of high quality, low cost products and prompt order
fulfillment. The Company is able to select different third-party suppliers to
take advantage of changes in manufacturing, payment terms and shipping costs.
The Company does not rely on any single third-party supplier, the loss of which
would be material to the Company.
In September 1996, Samsonite implemented centralized direction and
coordination of all sourcing of finished products globally. The Company plans to
achieve maximum advantage from its purchasing leverage by aggregating orders
from the Company's different locations and by better planning and timing its
requirements and purchases. Manufacturing processes and materials and component
supply arrangements are factored into new product design or existing product
improvements. As a result, products are designed to be manufactured more
efficiently.
The Company has started a major effort to standardize its products around
the world. Components also will be standardized to the extent practicable
without sacrificing product quality and consumer-preferred product attributes.
This standardization will reduce product variations across brands and markets,
thus simplifying the Company's operations, reducing costs and reducing working
capital requirements.
The Company maintains a rigorous quality control program. Products are
designed to assure durability and strength, and a prototype of each new product
is put through a series of simulation and stress tests. In the Company's
manufacturing facilities and its Asian sourcing office, it uses quality control
inspectors, engineers and lab technicians to perform inspection and laboratory
testing on raw materials, parts and finished goods.
-11-
<PAGE>
In January 1996, the Company initiated a plan to restructure the
manufacturing and some administrative functions of its American Tourister
division. The restructuring included moving American Tourister's hardside
luggage manufacturing operations from Jacksonville, Florida to the Company's
Denver facility and consolidating some administrative functions. A provision for
the restructuring of $2.4 million was charged to expense during the fourth
quarter of fiscal 1996. This restructuring was completed in September 1996.
Annual cost savings from this restructuring are estimated to be $3.3 million. In
October 1996, the Company announced a restructuring and consolidation involving
its businesses around the world. Major components of the restructuring plan,
which is planned to generate savings of $12.7 million when fully implemented in
late fiscal 1998, include consolidation of hardside manufacturing to Denver from
Canada and Mexico, reduced staffing levels, completion of consolidation of
American Tourister, and consolidation of offices and functions in Europe and the
Far East. A provision of $10.7 million was charged to expense in the third
quarter of fiscal 1997.
COMPETITION
Competition in the luggage market is highly fragmented with the vast
majority of individual competitors having less than 10% of the Company's annual
luggage sales. In the United States, the Company competes based on brand name,
consumer advertising, product innovation, quality, differentiation, customer
service and, to a lesser extent, price. Price is more important at the lower end
of the luggage market where fewer differentiating features are offered.
Management of the Company believes that no luggage manufacturer, other than
Samsonite, has more than 10% of the United States luggage market. In Europe, the
Company competes based on its premium image, brand name, product quality, access
to established distribution channels and new product offerings. The Company's
principal competition in softside luggage in both Europe and the United States
markets is private label luggage manufactured in low labor cost countries,
primarily in Asia. The manufacture of softside luggage is labor intensive but
not capital intensive, so that the barriers to entry by additional competitors
are relatively low. At the very low end of the market is non-brand name luggage,
characterized by non-differentiation of features, low margins and high sales
volume.
CUSTOMERS
Customers include most major department stores in the United States and
Europe which carry luggage, most specialty stores featuring luggage products,
and many other retailers (mass merchants, discounters and other retailers).
Samsonite also sells directly to consumers through its 149 owned retail stores
in the United States and two owned retail stores in Europe, as of January 31,
1997. The Company is not dependent on any single customer, and no single
customer accounts for more than 5% of the Company's revenues.
TRADEMARKS AND PATENTS
Trademarks and patents are important to the Company. The Company is the
registered owner of its Samsonite, American Tourister, Lark and other luggage
trademarks and has approximately 2,111 trademark registrations in the United
States and abroad, as of January 31, 1997. The Company also owns approximately
200 United States patents and approximately 597 patents in selected foreign
countries. In addition, the Company has approximately 356 patent applications
pending worldwide. The Company pursues a policy of seeking patent protection
where appropriate for inventions embodied in its products. The Company's patents
include American Tourister's Easy Turn(R) wheel system and Samsonite's
Piggyback(R), Ultravalet(R) and Oyster luggage. Although some companies have
sought to imitate some of the Company's patented products, Samsonite has
generally been successful in enforcing its intellectual property rights.
EMPLOYEES AND LABOR RELATIONS
At January 31, 1997, the Company had approximately 7,600 employees
worldwide, with approximately 2,300 employees in the United States and
approximately 5,300 employees in other countries. In the United States,
approximately 650 employees are unionized under a contract which is renewed
every three years. The Company employs approximately 2,000 workers in its
-12-
<PAGE>
six European manufacturing plants located in Belgium, France, Spain, Italy and
Hungary. Union membership varies from country to country and is not officially
known to the Company; however, it is probable that most of the workers are
affiliated with a union. Most European union contracts have a one-year
duration. The Company believes its employee relations are good.
BACKGROUND; FORWARD-LOOKING STATEMENTS
Prior to July 14, 1995, Samsonite was a principal subsidiary of Astrum
International Corp. ("Astrum"), a holding company whose wholly-owned
subsidiaries were Samsonite, Culligan Water Technologies, Inc. ("Culligan"), a
manufacturer of water purification and treatment equipment, and McGregor
Corporation ("McGregor"), a manufacturer and distributor of apparel products and
a licensor of apparel brand names.
During the fourth quarter of fiscal 1995, Astrum adopted a plan to sell or
otherwise discontinue McGregor's apparel manufacturing business and to separate
Culligan from Astrum's other businesses, principally Samsonite. This was
accomplished through the following series of events:
. The McGregor apparel manufacturing and distribution businesses were
discontinued.
. The Company and Culligan entered into separate new credit facilities on
July 14, 1995. With borrowings under its new credit facility, Culligan made a
$112 million payment to the Company. The Company used the payment from
Culligan along with the proceeds from newly issued senior subordinated notes
and borrowings under its new credit facility to redeem the Company's
previously outstanding 11 1/2% Senior Secured Notes.
. On July 14, 1995, Astrum merged with Samsonite Corporation and changed
its name to Samsonite Corporation.
. On September 12, 1995, the Company distributed all outstanding Culligan
common stock to the Company's shareholders, thereby separating Culligan from
Samsonite.
Certain statements under the captions "Business Strategy and New Growth
Initiatives" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations," and elsewhere herein constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such factors included, among others, the following:
general economic and business conditions; industry capacity; changes in customer
preferences; demographic changes; competition; changes in methods of
distribution and technology; changes in political, social and economic
conditions and local regulations, particularly in Europe and Asia; the loss of
any significant customers; changes in interest rates; and various other factors
beyond the Company's control.
The forward-looking information referred to above includes, but is not
limited to, estimated annual cost savings resulting from the consolidation and
restructuring programs described herein. In addition to the risks,
uncertainties and other factors referred to above which may cause actual amounts
to differ materially from estimated amounts, such estimates of annual cost
savings are based on various factors and were derived utilizing numerous
important assumptions, including (i) achieving estimated reductions in the
number of total employees within anticipated time frames and at currently
projected severance cost levels, while maintaining work flow in the business
areas affected, (ii) the assimilation of American Tourister and other production
in Samsonite's Denver facility without disruption to distribution activities and
(iii) subleasing vacated facilities within anticipated time frames at
anticipated sublease rent levels. The failure of these assumptions to be
realized may cause the actual annual cost savings to differ materially from the
estimates.
-13-
<PAGE>
ITEM 2. PROPERTIES
The following table sets forth certain information relating to the Company's
principal properties and facilities. All of the Company's manufacturing plants,
in the opinion of the Company's management, have been adequately maintained and
are in good operating condition. In fiscal 1997, approximately 40% of the
Company's revenues from softside products were from products manufactured at the
Company's own facilities. Revenues from hardside products are generally all from
products manufactured at the Company's own facilities. The Company believes that
its existing facilities have sufficient capacity, together with sourcing
capacity from third parties, to handle sales volumes for the foreseeable future.
The Company's headquarters in Denver shares the same location as a manufacturing
facility.
<TABLE>
<CAPTION>
Approximate
Owned or Facility Size
Location Leased (thousands of sq. ft.)
-------- -------- ----------------------
<S> <C> <C>
Denver, CO.............. Owned/Leased 1,279
Tucson, AZ.............. Owned/Leased 63
Jacksonville, FL........ Leased 390
Warren, RI.............. Leased 94
Stratford, Canada....... Owned 212
Nogales, Mexico......... Leased 420
Mexico City, Mexico..... Owned 205
Oudenaarde, Belgium..... Owned 549
Ningbo, China........... Owned 100
Nahsik, India........... Owned 103
Torhout, Belgium........ Owned 79
Henin-Beaumont, France.. Owned 98
Szekszard, Hungary...... Owned 81
Tres Cantos, Spain...... Owned 37
Saltrio, Italy.......... Leased 74
Cesano Boscone, Italy... Leased 25
Singapore............... Leased 12
</TABLE>
The Company also maintains numerous sales offices, retail outlets and
distribution centers in the United States and abroad.
ITEM 3. LEGAL PROCEEDINGS
The information regarding legal proceedings contained in note 13 to the
Company's consolidated financial statements included elsewhere herein is
incorporated herein by reference.
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
-14-
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock, par value $.01 per share (the "Common Stock"), is
presently traded on the Nasdaq National Market under the symbol "SAMC". Prior to
the July 14, 1995 merger of Samsonite and Astrum, the Company's common stock was
traded on the Nasdaq National Market under the symbol "ASTI". The table below
sets forth the high and low sale prices for the Common Stock for fiscal years
1996 and 1997 and through April 7, 1997 (as reported on the Nasdaq National
Market). The closing price of the Common Stock on the Nasdaq National Market on
April 7, 1997 was $44 3/8.
<TABLE>
<CAPTION>
Fiscal 1996 High Low
- ----------- ------ ------
<S> <C> <C>
Fiscal quarter ended:
April 30, 1995 28 5/8 23 1/4
July 31, 1995 28 3/4 26
October 31, 1995 (a) 28 1/4 9 7/8
January 31, 1996 10 3/8 9 1/4
Fiscal 1997
- -----------
Fiscal quarter ended:
April 30, 1996 19 1/4 9 5/8
July 31, 1996 24 1/2 17 3/8
October 31, 1996 40 3/4 18
January 31, 1997 45 3/4 33 1/2
Fiscal 1998
- -----------
February 1, 1997 through April 7, 1997 50 7/8 39 1/8
</TABLE>
(a) Prior to September 12, 1995, Culligan Water Technologies, Inc.
("Culligan") was a wholly owned subsidiary of the Company. On September
12, 1995, the Company distributed, as a special dividend, all of
Culligan's then outstanding common stock to the Company's stockholders.
The high and low sales prices for the Common Stock during the period
from August 1, 1995 through September 12, 1995 were $28 1/4 and $26,
respectively. From September 13, 1995 through October 31, 1995, the
high and low sales prices were $17 1/2 and $9 7/8, respectively.
As of April 7, 1997, the number of holders of record of the Common Stock
was 45.
All holders of shares of Common Stock shall share ratably in any dividends
declared by the Board of Directors of the Company. The Company does not
anticipate paying cash dividends on the Common Stock in the foreseeable future.
Any payment of future dividends will be at the discretion of the Company's Board
of Directors and will depend upon, among other things, the Company's earnings,
financial condition, capital requirements, extent of indebtedness and
contractual restrictions with respect to the payment of dividends. The terms of
the Company's indebtedness currently restrict the ability of the Company to pay
dividends on the Common Stock.
-15-
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The selected historical financial information for the Company
presented below is derived from the Company's audited consolidated financial
statements. As discussed in note 1b to the Company's consolidated financial
statements included elsewhere herein and note (a) to the selected historical
financial information presented below, the consolidated financial statements for
periods subsequent to June 30, 1993 are not comparable to prior periods.
The selected historical financial information presented below should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Company's consolidated financial
statements and related notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
Predecessor Reorganized
Company (a) Company (a)
------------------------ ------------------------------------------------------------------
Combined
Five Seven Twelve
Year Months Months Months
Ended Ended Ended Ended Year Ended January 31,
January 31, June 30, January 31, January 31, --------------------------------------
Statement of Operations Data 1993 1993 1994 1994 (a) 1995 1996 1997
- ---------------------------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales (b) $ 480,630 192,519 331,100 523,619 635,452 675,209 741,138
Cost of Goods Sold 280,051 113,032 196,777 309,809 373,967 414,691 449,333
---------- ---------- ---------- ---------- ---------- ---------- ----------
Gross Profit 200,579 79,487 134,323 213,810 261,485 260,518 291,805
Selling, General and
Administrative Expenses (c) 146,211 66,094 97,480 163,574 197,716 203,701 233,761
Amortization of Intangible
Assets (h) 466 206 39,924 40,130 67,189 63,824 31,837
Provision for Restructuring
Operations - - - - - 2,369 10,670
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating Income (Loss) 53,902 13,187 (3,081) 10,106 (3,420) (9,376) 15,537
Interest Income - - 4,342 4,342 2,909 4,709 1,419
Other Income (Expense) (2,421) 360 5,504 5,864 2,729 3,967 18,821
Interest Expense and
Amortization of Premium
and Issue Costs of Debt 103,871 (d) 4,404 (d) 24,839 29,243 37,875 39,974 35,670
Reorganization Items (415) 462,447 - 462,447 - - -
Income Tax Expense 12,991 2,313 6,797 9,110 10,619 9,095 10,389
Minority Interest in
Earnings of Subsidiaries (2,293) (901) (1,148) (2,049) (931) (1,385) (1,041)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (Loss) from
Continuing Operations (68,089) 468,376 (26,019) 442,357 (47,207) (51,154) (11,323)
Income (Loss) from
Operations Discontinued
and Sold, Cumulative Effect
of Change in Accounting
Principles and Extraordinary
Items 112,108 456,448 (25,502) 430,946 (64,372) (10,293) -
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Income (Loss) $ 44,019 924,824 (51,521) 873,303 (111,579) (61,447) (11,323)
========== ========== ========== ========== ========== ========== ==========
Loss per Share from
Continuing Operations N/A N/A (1.68) N/A (3.05) (3.24) (.71)
Net Loss per Share N/A N/A (3.33) N/A (7.22) (3.89) (.71)
Balance Sheet Data (as of end of period)
- ------------------
Property, plant and
equipment, net $ 101,581 131,984 (e) 137,686 140,912 143,959
Total Assets $ 825,970 1,111,735 (e) 866,000 607,443 592,658
Long-Term obligations
(including current
installments) $1,579,447 (f) 573,197 (g) 417,175 310,959 290,617
Stockholders' Equity
(Deficit) $ (923,833) 253,693 (g) 148,472 25,116 24,998
</TABLE>
See footnotes beginning on page 18.
-16-
<PAGE>
IMPACT OF FAIR VALUE ADJUSTMENTS ATTRIBUTABLE TO THE REORGANIZATION OF ASTRUM,
RESTRUCTURINGS AND CERTAIN OTHER EXPENSES:
Included in the Company's statements of operations are amortization
and depreciation related to adjustments of assets and liabilities to fair value
in connection with the adoption of the American Institute of Certified Public
Accountants Statement of Position 90-7 entitled "Financial Reporting by Entities
in Reorganization under the Bankruptcy Code" ("SOP 90-7") in June 1993. The
most significant adjustment related to reorganization value in excess of
identifiable assets which was amortized over the three-year period ended June
1996. The Company also recorded fresh start adjustments to reflect tradenames,
licenses, patents, and other intangibles at their fair values, which are being
amortized over periods ranging from one to forty years. Property and equipment
adjusted to fair values in connection with the adoption of SOP 90-7 are being
depreciated over their respective useful lives, primarily ranging from two to
six years. In addition, the Company's statements of operations include
provisions for restructuring operations and certain other expenses associated
with the fiscal 1997 restructuring and management team changes. Such other
expenses include those incurred for consulting services in connection with
establishing the fiscal 1997 restructuring plan, the cessation of the former
chief executive officer's employment, the hiring of new and additional members
of the executive management team, and for expenses incurred in excess of the
original fiscal 1996 provision for the consolidation of American Tourister
manufacturing facilities.
Due to the significance of these items, management believes that it is
useful to isolate their impact on net loss and operating income (loss) as shown
below. This information does not represent and should not be considered an
alternative to net income, any other measure of performance as determined by
generally accepted accounting principles or as an indicator of operating
performance. The information presented may not be comparable to similar
presentations reported by other companies.
<TABLE>
<CAPTION>
Year Ended January 31,
---------------------------------------------
Impact on Net Loss 1995 1996 1997
- ------------------ --------- --------- --------
<S> <C> <C> <C>
(In thousands, except per share amounts)
Fresh Start Amortization and Depreciation (h) $70,599 66,433 34,484
Provision for Restructuring Operations -- 2,369 10,670
Certain Other Expenses Associated with the Restructuring and
Management Changes(c) -- -- 5,400
Tax Benefit (6,366) (5,629) (11,319)
------- ------- -------
After-Tax Impact on Net Loss 64,233 63,173 39,235
======= ======= =======
Impact on Net Loss Per Share $ 4.15 4.00 2.35
======= ======= =======
Impact on Operating Income (Loss)
- ---------------------------------
Operating Income (Loss) $(3,420) (9,376) 15,537
Fresh Start Amortization and Depreciation (h) 70,599 66,433 34,484
Provision for Restructuring Operations -- 2,369 10,670
Certain Other Expenses Associated with the
Restructuring and Management Changes (c) -- -- 5,400
------- ------- -------
Operating Income Before Fresh Start Amortization and
Depreciation, Provision for Restructuring Operations
and Certain Other Expenses Associated with the
Restructuring and Management $67,179 59,426 66,091
======= ======= =======
</TABLE>
See footnotes beginning on Page 18.
-17-
<PAGE>
(a) In June 1993, Astrum completed a financial restructuring pursuant to a plan
of reorganization under Chapter 11 of the United States Bankruptcy Code
(the "Plan"). Effective June 30, 1993 and pursuant to the American
Institute of Certified Public Accountants Statement of Position 90-7
entitled "Reporting by Entities in Reorganization under the Bankruptcy
Code" ("SOP 90-7"), the Company was required to adjust its assets and
liabilities to their fair ("fresh start") values and create a new entity
for financial reporting purposes. The information for the "Predecessor
Company" reflects activity occurring through June 30, 1993, prior to the
effectiveness of the Plan, and the information for the "Reorganized
Company" reflects activity occurring after such date. As a result of the
effects of SOP 90-7 on amortization of intangibles, depreciation, interest
expense, and reorganization items, the periods before and after June 30,
1993 are not comparable.
(b) The Company acquired American Tourister in August 1993. Net sales for the
fiscal year ended January 31, 1994 include net sales of $47.7 million of
American Tourister for five months. Net sales for the fiscal years ended
January 31, 1995, 1996 and 1997 include net sales for American Tourister of
$117.8 million, $115.0 million and $147.3 million, respectively.
(c) Selling, general and administrative expenses include $5.4 million of
expenses during the year ended January 31, 1997 for consulting fees to
establish the restructuring plan ($0.8 million), for the cessation of the
former chief executive officer's employment and the change in management
($4.1 million), and for expenses in excess of the original provision in
fiscal 1996 for the consolidation of American Tourister manufacturing
facilities ($0.5 million).
(d) In accordance with SOP 90-7, no interest expense on the Pre-petition
Securities (as defined herein) was accrued from June 25, 1992 through June
30, 1993.
(e) Includes the effects of SOP 90-7 "fresh start" adjustments recorded at June
30, 1993, net of depreciation and amortization. Pursuant to SOP 90-7, the
net book value of property and equipment was increased by $34 million and
intangible and other assets were increased by $530 million.
(f) Immediately prior to the effective date of the Plan, $527 million principal
amount of Astrum's 12.85% Senior Subordinated Notes due 1997 (the "Pre-
petition Notes") and $698 million principal amount of Astrum's 13.05%
Subordinated Debentures due 1999 (the "Pre-petition Debentures" and,
together with the Pre-petition Notes, the "Pre-petition Securities") were
outstanding. The Pre-petition Securities were classified as long-term debt
as of January 31, 1991. Due to the default that occurred on the Pre-
petition Securities during the year ended January 31, 1992, the
classification was changed to current liabilities since payment had been
demanded. These obligations have been included in long-term debt (including
current installments) for purposes of this presentation. During the year
ended January 31, 1993, the obligations were reclassified to liabilities
subject to compromise in Chapter 11 proceedings to conform to the reporting
requirements of companies in bankruptcy proceedings. The amounts shown at
January 31, 1993 includes the Pre-petition Securities plus accrued interest
thereon through June 25, 1992.
(g) Pursuant to SOP 90-7, under the Plan effected in June 1993, $1.5 billion in
long-term debt subject to compromise, including accrued interest, was
forgiven in exchange for $500 million principal amount of senior secured
notes, approximately $342 million in cash and 15 million shares of common
stock. In July 1995, the senior secured notes were redeemed with the
proceeds from the sale of the Series A notes and borrowings under the
Company's U.S. banking lines.
-18-
<PAGE>
(h) As discussed in note (a) above, the Company adjusted its assets and
liabilities to their fresh start values effective June 30, 1993. Since June
30, 1993, the Company's statements of operations include amortization and
depreciation related to these fresh start adjustments. The most significant
fresh start adjustment relates to recording Reorganization Value in Excess
of Identifiable Assets, which was amortized over a three-year period ending
in June 1996. In addition, fresh start amortization includes amortization of
fresh start adjustments to reflect the fair value of trademarks, licenses,
patents and other intangibles, which are being amortized over periods from
one to forty years. Fresh start amortization and depreciation also includes
depreciation of fresh start adjustments to reflect the fair value of
property and equipment, depreciated over their estimated useful lives
ranging primarily from two to six years.
<TABLE>
<CAPTION>
Fresh Start Amortization and Depreciation consists of the following:
YEAR ENDED JANUARY 31,
------------------------
1995 1996 1997
------- ------ ------
<S> <C> <C> <C>
(IN THOUSANDS)
FRESH START AMORTIZATION:
Amortization of Reorganization Value of Identifiable Assets.................. $55,072 55,072 22,947
Amortization of Licenses, Patents and Other.................................. 8,926 5,263 4,897
Amortization of Trademarks................................................... 3,191 2,560 3,079
------- ------ ------
Total Fresh Start Amortization Included in Amortization of
Intangibles.............................................................. 67,189 62,895 30,923
------- ------ ------
FRESH START DEPRECIATION:
Included in Cost of Goods Sold............................................... 2,790 2,895 2,914
Included in Selling, General and Administrative Expenses..................... 620 643 647
------- ------ ------
Total Fresh Start Depreciation............................................ 3,410 3,538 3,561
------- ------ ------
Total Fresh Start Amortization and Depreciation.............................. $70,599 66,433 34,484
======= ====== ======
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
selected financial data and the consolidated financial statements of the Company
and notes thereto commencing on page F-1. The Company's fiscal year ends on
January 31. References to a fiscal year denote the calendar year in which the
fiscal year ended; for example, "fiscal 1997" refers to the 12 months ended
January 31, 1997. The Company's continuing operations consist of a single
business segment, the manufacture and sale of luggage and luggage products. The
Company's sales are directed to three principal markets: the United States,
Europe and International (representing the balance of the world).
Results of Operations
- ---------------------
FISCAL 1997 COMPARED TO FISCAL 1996
General. The Company analyzes its net sales and operations by the following
categories: (1) "European operations" which consist of its European
manufacturing and distribution operations whose functional currency is the
Belgian franc, (2) "U.S. operations" which includes sales within the U.S. from
the Samsonite and American Tourister manufacturing and distribution operations
and (3) "International operations" which include exports from the U.S.,
manufacturing and distribution operations in countries with operations which are
smaller in size compared to the U.S. and Europe (primarily Canada and Mexico),
and global licensing operations.
Results of European operations were translated from Belgian francs to U.S.
dollars in fiscal 1997 and fiscal 1996 at yearly average rates of approximately
30.93 and 29.38 francs to the U.S. dollar, respectively. This represents a
decrease in the value of the Belgian franc of 5.0%, which results in decreases
in reported sales, cost of sales and other expenses in fiscal 1997 compared to
fiscal 1996. The most significant effects from the difference in exchange rates
from last year to the current year are noted in the following analysis and
referred to as an "exchange rate difference". The Company enters into forward
foreign exchange contracts and option contracts to reduce its economic exposure
to fluctuations in currency exchange rates for the
-19-
<PAGE>
Belgian franc and other foreign currencies. Such instruments are marked to
market at the end of each accounting period; realized and unrealized gains and
losses are recorded in other income. During fiscal 1997, the Company had net
gains from such instruments of $2.6 million; during fiscal 1996, the Company had
net losses on such instruments of $2.2 million.
Net Sales. Consolidated net sales increased to $741.1 million in fiscal 1997
from $675.2 million in fiscal 1996, an increase of $65.9 million or 9.8%.
Adjusted for the European exchange rate difference, sales increased from last
year by 12.0%.
Sales from European operations increased from $271.6 million in fiscal 1996 to
$280.8 million in fiscal 1997, an increase of $9.2 million. The exchange rate
difference resulted in a $14.8 million decrease in reported sales versus fiscal
1996. The remainder, an increase of $24.0 million, represents an increase in
sales expressed in Belgian francs of 8.8% from fiscal 1996. Despite a generally
weak European economy, sales have increased due to increased market share,
increased sales of diversified products (which includes footwear, handbags, and
other travel accessories), and consumer acceptance of new product lines.
European sales enjoyed strong third and fourth quarters, with strong summer and
Christmas sales reversing trends earlier in the year.
Sales from U.S. operations increased from $329.6 million in fiscal 1996 to
$374.3 million in fiscal 1997, an increase of $44.7 million or 13.6%. The
increase is due to continued broad consumer preference and demand for Samsonite
brand products, particularly lines of upright, lightweight softside luggage
which were redesigned in fiscal 1996. Additionally, the Company began sales in
the third quarter of fiscal 1997 of its new EZ CART (TM) product. Sales of
softside products in the U.S. continue to increase while sales of hardside
products decreased from fiscal 1996 to fiscal 1997. Sales from the Company's
retail stores increased by $15.8 million or 25.2%, from $62.7 million last year
to $78.5 million in the current year. Same store sales increased by 10.3% from
last year. The Company had 149 retail outlets open at January 31, 1997 compared
to 126 at January 31, 1996.
Sales from International operations increased from $74.0 million in fiscal
1996 to $86.0 million in fiscal 1997, an increase of $12.0 million or 16.2%. Of
the change in revenues from last year, $4.0 million is due to revenue from the
sale of McGregor apparel tradenames in certain Pacific Rim countries. The
remainder is due primarily to increased sales from the Mexico City manufacturing
and distribution company, and the Singapore distribution company which began
operations on January 1, 1996.
Gross profit. Consolidated gross profit for fiscal 1997 increased from fiscal
1996 by $31.3 million. Gross margin increased by 0.8 percentage point, from
38.6% in fiscal 1996 to 39.4% in fiscal 1997. Without the effect of a sale of
tradenames for $4.0 million, gross margin increased 0.4 percentage point to
39.0% in fiscal 1997.
Gross margins from European operations increased by 1.5 percentage points,
from 37.7% in fiscal 1996 to 39.2% in fiscal 1997. The improvement is due to
price increases in selected product lines, declining materials costs, and
improving productivity variances compared to last year.
Gross profit margins from U.S. operations increased from fiscal 1996 by 0.7
percentage point from 38.5% last year to 39.2% in the current year. The
improvement is due to lower raw materials costs, product cost improvements on
certain products, the introduction of innovative products at higher margins,
price increases on selected product lines in the fourth quarter of fiscal 1997,
higher retail sales (which produce a higher margin than wholesale sales), and
decreased sales of obsolete products in fiscal 1997. These improvements were
offset by promotional sales discounts, increased sales of certain lower margin
products relative to the previous fiscal year, negative productivity variances
from the startup of production of new hardside products and the restructuring of
operations, and higher than anticipated costs on certain new product lines. The
net result of these factors was the slightly higher margin percentage in fiscal
1997 compared to fiscal 1996.
Excluding the effect of the tradename sales in fiscal 1997, gross profit
margins from International operations decreased by 4.6 percentage points. The
decrease is attributable to the lack of price increases in the current fiscal
year and a greater proportion of sales of lower margin products in fiscal 1997.
-20-
<PAGE>
The Company has begun a global standardization project to standardize its
product lineup and product components, and finished goods purchasing in order to
continue to increase gross profit margins. To further enhance gross profit
margins, the Company announced price increases in the United States on many of
its product lines effective March 1, 1997.
Selling, General and Administrative Expenses ("SG&A"). Consolidated SG&A
increased by $30.1 million from fiscal 1996 to fiscal 1997. As a percent of
sales, SG&A was 31.5% in fiscal 1997 and 30.2% in fiscal 1996. Expenses
totaling approximately $5.4 million were incurred during fiscal 1997 for
consulting fees to establish the restructuring plan, the cessation of the former
CEO's employment, the hiring of new and additional members of the executive
management team, and for expenses in excess of the original provision in fiscal
1996 for the consolidation of American Tourister manufacturing facilities.
Without such expenses, SG&A would have been 30.8% of sales during fiscal 1997.
SG&A for European operations increased by $5.5 million from fiscal 1996 to
fiscal 1997. The exchange rate difference caused SG&A to decrease by $4.0
million. The remainder, an increase of $9.5 million, resulted from an increase
in SG&A expressed in Belgian francs of 13.3%. The increase is due to higher
variable selling and distribution costs related to the higher sales levels ($2.0
million); higher salaries and employee benefits from the hiring of additional
sales and general management personnel to support higher sales levels and growth
oriented projects ($2.7 million); higher bad debt expense because of the
financial difficulties of a few specific customers ($1.1 million); higher
advertising expenses to support new products, entry into the eastern European
markets, and brand image in light of a generally weak European economy ($2.3
million); and various other expense categories ($1.4 million).
SG&A for U.S. operations increased by $22.3 million in fiscal 1997 compared to
fiscal 1996. The increase is due to higher selling and administrative costs
related to the increase in retail sales ($7.9 million); higher national and co-
op advertising expenses ($6.8 million); expenses relating to the cessation of
the former CEO's employment, expenses of hiring new additional management team,
consulting fees and the other expenses incurred related to the restructuring
($5.4 million); compensation expense related to restricted stock awards ($0.9
million): and other net increases ($1.3 million).
SG&A for the International operations increased by $2.3 million primarily due
to the expenses incurred in the foreign joint venture operations in Singapore,
which began in fiscal 1997.
Amortization of intangible assets. The Company recorded significant
intangible assets as a result of its reorganization in 1993. See notes 1b, 1i
and 6 to the Company's consolidated financial statements included elsewhere
herein for a discussion of the recording and amortization of intangible assets.
Reorganization value in excess of identifiable assets became fully amortized
as of June 30, 1996, which generally accounts for the decrease in amortization
of intangible assets from $63.8 million in fiscal 1996 to $31.8 million in
fiscal 1997.
Provision for restructuring operations. The fiscal 1996 provision resulted
from a restructuring of certain manufacturing and administrative functions of
the American Tourister division. The fiscal 1997 provision of $10.7 million
resulted from a program to further consolidate functions and operations in North
America, Europe and the Far East, and to reduce or eliminate certain other
operations. The fiscal 1997 restructuring is expected to be completed by
October 1997. The fiscal 1997 restructuring plan includes further consolidation
of hardside luggage production to Samsonite's largest U.S. facility located in
Denver, CO from other locations in the Americas, as well as eventual
consolidation of many administrative and control functions, primarily to Denver.
The Company is eliminating at least 450 positions worldwide, including
approximately 150 manufacturing positions and approximately 300 managerial,
office and clerical positions. Annual estimated pretax cost savings from the
restructuring program are expected to be approximately $12.7 million. The
restructuring provision consists primarily of costs associated with involuntary
employee terminations and is comprised of estimated cash expenditures of $9.7
million and estimated non-cash charges of $1.0 million, both on a pretax basis.
-21-
<PAGE>
Operating income (loss). Operating results improved from a loss in fiscal 1996
of $9.4 million to income in fiscal 1997 of $15.5 million, an increase of $24.9
million. This increase is a result of higher revenues and improved margins
which increased gross profit by $31.3 million from last year and the decrease in
amortization of intangibles of $32.0 million, both of which were partially
offset by increases in SG&A of $30.1 million and the higher provision for
restructuring of $8.3 million.
Interest income. Interest income decreased from $4.7 million in fiscal 1996
to $1.4 million in fiscal 1997. Prior year interest income included $2.9
million realized from a note receivable collected in connection with the sale of
an investment in a television station. Recurring interest income results from
temporary investments of cash on hand and is $0.4 million less than in fiscal
1996.
Interest expense and amortization of debt issue costs. Interest expense and
amortization of debt issue costs decreased from $40.0 million in fiscal 1996 to
$35.7 million in fiscal 1997 due to lower levels of outstanding indebtedness in
fiscal 1997 and lower average interest rates. The U.S. senior credit facility
allowed for lower rates in fiscal 1997 based on improved performance and lower
debt levels.
Other, net. See Note 14 to the consolidated financial statements for a
comparative analysis of other income (expense). The Company has entered into
certain forward exchange contracts to hedge its exposures to changes in exchange
rates. Other income for fiscal 1997 includes income from foreign currency
transactions of $2.6 million. In fiscal 1996, such transactions resulted in a
loss of $2.2 million.
Other income in fiscal 1997 includes $11.1 million from the adjustment of a
previously recorded liability for contingent pension liabilities. See Note 13
to the consolidated financial statements included elsewhere herein for a
discussion of this item.
Other income in fiscal 1997 includes $3.8 million from the favorable
settlement for $0.2 million of a claim against the Company by a related party.
The Company had previously accrued $4.0 million for such claim. This claim is
part of the Contingent Liability with Respect to the Old Notes described in Note
13 to the consolidated financial statements included elsewhere herein and
relates to the claim for interest on overdue installments of interest accruing
prior to the commencement of the bankruptcy of the Company's predecessor in
1993. The contingent liability was recorded as part of the reorganization. The
holders of this claim were Apollo Investment Fund L.P. ("Apollo") and an
affiliate of Apollo. Apollo and its affiliates own 36.08% of the outstanding
shares of the Company's common stock as of March 31, 1997.
Income taxes. Income taxes increased from $9.1 million in fiscal 1996 to
$10.4 million in fiscal 1997. The increase in tax expense is due to higher
consolidated pretax earnings in fiscal 1997, and less amortization of
reorganization value in excess of identifiable assets, which is not deductible
for tax purposes, in fiscal 1997 as compared to fiscal 1996. The relationship
between the expected income tax benefit computed by applying the U.S. statutory
rate to pretax losses and income tax expense recognized results primarily
because of (i) the nondeductibility for tax purposes of amortization of
reorganization value in excess of identifiable assets, (ii) foreign income tax
expense provided on foreign earnings, and (iii) state and local income taxes.
See Note 10 to the consolidated financial statements included elsewhere herein
for further analysis of income tax expense.
Net loss. The net loss decreased from $61.5 million in fiscal 1996 to $11.3
million in fiscal 1997, a decrease of $50.2 million. The decrease in the net
loss is caused by the effect of the increases in operating and other income and
the decreases in interest income, interest expense and extraordinary loss, less
the increase in income tax expense.
FISCAL 1996 COMPARED TO FISCAL 1995
General. Results of European operations were translated from Belgian francs to
U.S. dollars in fiscal 1996 and fiscal 1995 at yearly average rates of
approximately 29.38 and 33.17 francs to the U.S. dollar, respectively. This
represents an increase in the value of the Belgian franc of 12.9% in fiscal
1996, which results in significant increases in reported sales, cost of goods
sold and other expenses in fiscal 1996 compared to fiscal 1995. The most
significant effects from the difference in exchange rates from year to year are
noted in the following analysis and referred to as an "exchange rate
difference."
-22-
<PAGE>
Net Sales. Consolidated net sales increased to $675.2 million in fiscal 1996
from $635.5 million in fiscal 1995, an increase of $39.7 million or 6.2%.
Sales from the European operations increased from $231.0 million in fiscal
1995 to $271.6 million in fiscal 1996, an increase of $40.6 million. Of this
increase, approximately $31.0 million results from the exchange rate
difference. The remainder of the increase in European sales is attributable to
an improved retail sales environment and the introduction of new products,
including the Epsilon hardside product line. Expressed in terms of its
functional currency, European sales increased by 4.2% in 1996 when compared to
1995.
Sales from U.S. operations declined from $341.1 million in fiscal 1995 to
$329.6 million in fiscal 1996, a decrease of $11.5 million, or 3.4%. The
decrease was due to a weak retail sales environment, increased foreign
competition in the low-priced upright suitcase market, and delays during the
first six months of fiscal 1996 in the introduction of new products. The decline
in sales versus the prior year occurred primarily during the first half of
fiscal 1996 when sales were $15.7 million less than sales for the same period in
fiscal 1995.
Sales from the International operations increased from $63.4 million in fiscal
1995 to $74.0 million in fiscal 1996, an increase of $10.6 million or 16.7%.
The increase is attributable primarily to revenues from the Company's Mexican
operations of $11.7 million. The Company acquired the interest of its joint
venture partner in the venture's Mexican operations in exchange for the
Company's interest in the venture's other companies in fiscal 1996 and began
consolidating its results of operations with those of the Company. The results
of the Company's Mexican operations were reported on the equity method of
accounting in prior years.
Gross Profit. Consolidated gross profit for fiscal 1996 declined from fiscal
1995 by $1.0 million. Gross margin decreased from 41.1% in fiscal 1995 to 38.6%
in fiscal 1996.
Margin percentages from European operations decreased by 0.7 % due to
increased sales in fiscal 1996 compared to fiscal 1995 of products with lower
profit margins, obsolescence write-offs for discontinued product lines, raw
materials price increases, and unfavorable variances associated with the startup
of production for the Epsilon line.
Gross margin percentages from United States operations sales declined 3.3%.
The primary cause of the decrease was higher raw materials costs compared to the
prior year, particularly for plastics raw materials and paper product
components. Because of strong competition from lower priced imports, the cost
increases were not offset by product price increases and, in some instances,
were accompanied by sales price decreases. Management estimates higher raw
materials costs resulted in a margin decrease of approximately 1.2%. Other
factors causing the decline in margins and their estimated effect include
increased obsolescence charges - 0.8%, increased sales of obsolete goods at less
than normal margins - 0.4%, and unfavorable productivity and other variances -
0.9%.
Gross margin percentages from the International operations sales declined by
5.6% compared to those of the prior year primarily for the same reasons margins
declined for United States operations.
Selling, General and Administrative Expenses. Consolidated SG&A increased by
$6.0 million from fiscal 1995 to fiscal 1996.
European operations SG&A increased by $8.1 million due entirely to the
exchange rate difference from fiscal 1995 to fiscal 1996. Expressed in terms of
its functional currency, fiscal 1996 Europe division SG&A was unchanged.
SG&A for United States operations decreased by $7.4 million from fiscal 1995
to fiscal 1996. Selling expenses decreased from 1995 to 1996 as a result of a
decrease in advertising expenses of $6.4 million. The decrease in advertising
expenses was offset somewhat by increases in American Tourister retail division
selling expenses and other expenses of $3.9 million.
-23-
<PAGE>
PAGE>
Other administrative expenses from the U.S. operations declined $4.9 million
from the prior year. Reductions in office supplies and equipment, bad debt
expense and performance bonuses contributed to this decrease in expenses. The
Company has been successful in reducing administrative expenses from the
previous year in part due to the merger of Astrum and its subsidiary, Samsonite
Corporation, which resulted in cost savings for part of fiscal 1996 due to the
elimination of certain duplicative functions. The Company also began a program
to contain and reduce expenses related to the resolution of issues pertaining to
the reorganization, related expenses of attorneys and consultants, and other
administrative expenses.
SG&A for the International operations increased by $5.3 million from fiscal
1995 to fiscal 1996. The consolidation of the Mexican operations, which was
accounted for on the equity method in prior years, accounted for $4.9 million of
the increase. The remaining increase resulted primarily from increased legal
fees, advertising and other expenses related to the expansion of the Company's
export business.
Amortization of Intangibles. The Company has recorded significant intangible
assets as a result of the reorganization in 1993. See notes 1b, 1i, and 6 to
the Company's consolidated financial statements included elsewhere herein for a
discussion of the recording and amortization of intangible assets. Amortization
of intangibles decreased from $67.2 million in fiscal 1995 to $63.8 million in
fiscal 1996 as a result of certain license and patent intangibles becoming fully
amortized during the year.
Provision for Restructuring Operations. The $2.4 million provision for
restructuring resulted from management's decision to restructure the
manufacturing and various administrative functions of its American Tourister
division. Because of available production capacity in its hardside manufacturing
facility in Denver, the American Tourister hardside luggage manufacturing
operations in Jacksonville, Florida were relocated to Denver in August 1996.
Warehouse and other non-manufacturing functions remained in Jacksonville.
American Tourister maintains a division headquarters in Warren, Rhode Island,
but certain aspects of finance, management information systems, and human
resources functions were consolidated in Denver. The annual cost savings
resulting from the restructuring is estimated at $3.3 million. The components of
the restructuring charge were (1) $1.0 million for abandonment of assets and
costs to prepare the manufacturing facility to be subleased, (2) $1.0 million
for employee termination costs, and (3) $0.4 million for other identified
restructuring expenses.
Operating Loss. Operating loss increased from $3.4 million in fiscal 1995 to
$9.4 million in fiscal 1996 primarily as a result of the $2.4 million
restructuring charge for American Tourister operations and the decrease in gross
margins discussed above.
Interest Income. Interest income increased from $2.9 million in fiscal 1995 to
$4.7 million in fiscal 1996, an increase of $1.8 million, primarily as a result
of interest income realized from a note receivable collected in connection with
the sale of an investment in a television station.
Interest Expense and Amortization of Premium and Debt Issue Costs. Interest
expense and amortization of premium and debt issue costs increased by $2.1
million from fiscal 1995 to fiscal 1996. European operations interest expense
increased by $1.1 million, $0.8 million of which was due to the exchange rate
difference. Net additional interest expense of $1.3 million was incurred as a
result of refinancing the 11 1/2% Senior Secured Notes. The proceeds of the
newly issued Series A Notes were held in escrow for a period of one month prior
to the retirement of the 11 1/2% Senior Secured Notes. During this one month
period, interest accrued on both the 11 1/2% Senior Secured Notes and the newly
issued Series A Notes.
Other, Net. See Note 14 to the consolidated financial statements included
elsewhere herein for a comparative analysis of other income (expense).
Income Tax Expense. Although the Company incurred a loss in fiscal 1996 and
fiscal 1995 for financial reporting purposes, income tax expense was recognized
primarily because of (i) the nondeductibility for tax purposes of amortization
of reorganization value in excess of identifiable assets, (ii) foreign income
tax expense provided on foreign earnings and (iii) state income taxes.
-24-
<PAGE>
Operations Discontinued and Sold. The loss from discontinued operations in
fiscal 1996 includes an adjustment to reduce previously accrued losses on
disposal of $2.6 million, net of income taxes of $1.1 million, and a provision
for federal income taxes on the distribution of Culligan stock to certain
foreign stockholders of $3.8 million.
Extraordinary Item. The extraordinary loss in fiscal 1996 resulted from the
payment of an $18.0 million redemption premium upon the early retirement of the
Senior Secured Notes. The extraordinary loss is presented in the consolidated
financial statements net of the unamortized premium on such notes of $4.4
million and the associated income tax benefit of $5.6 million.
Net Loss. The net loss decreased from $111.6 million in fiscal 1995 to $61.5
million in fiscal 1996, a decrease of $50.1 million. The decrease in the net
loss is caused by a reduction in losses from discontinued operations of $62.1
million and the effects of other items discussed above. See note 2 to the
consolidated financial statements included elsewhere herein for a discussion of
operations discontinued and sold for fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
One measure of liquidity is commonly referred to as Operating Cash Flow.
Operating Cash Flow is defined as operating income (loss) adjusted for noncash
operating expenses, including amortization and depreciation. The Company
believes that Operating Cash Flow provides useful information regarding the
Company's ability to incur and service debt, but that it should not be
considered a substitute for operating income or cash flow from operations
determined in accordance with generally accepted accounting principles. Other
companies may calculate Operating Cash Flow in a different manner and the
Company's presentation of Operating Cash Flow may not be comparable to similar
presentations reported by other companies. Operating Cash Flow does not take
into consideration substantial costs of doing business, such as interest
expense, and should not be considered in isolation to or as a substitute for
other measures of performance. Operating Cash Flow does not represent funds
available for discretionary use by the Company because these funds are required
for debt service, capital expenditures to replace fixed assets, and other
commitments and contingencies. Operating Cash Flow for fiscal years ended
January 31, 1995, 1996, and 1997 was computed as follows:
<TABLE>
<CAPTION>
Year Ended January 31,
------------------------
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
(In thousands)
Operating income (loss) $(3,420) (9,376) 15,537
Fresh start amortization and depreciation 70,599 66,433 34,484
------- ------ ------
Operating income before fresh start amortization and depreciation 67,179 57,057 50,021
Other amortization and depreciation 14,887 17,668 19,405
------- ------ ------
Operating Cash Flow $82,066 74,725 69,426
======= ====== ======
</TABLE>
Operating Cash Flow has been reduced for the effects of the provisions for
restructuring operations and certain other expenses associated with the
restructuring and management team changes as follows:
<TABLE>
<CAPTION>
Year Ended January 31,
------------------------
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
(In thousands)
Operating Cash Flow $82,066 74,725 69,426
Effect of provision for restructuring operations -- 2,369 10,670
Certain other expenses associated with the restructuring and management changes -- -- 5,400
------- ------ ------
Operating Cash Flow adjusted for the effects of restructuring and management
changes $82,066 77,094 85,496
======= ====== ======
</TABLE>
-25-
<PAGE>
Operating Cash Flow, as adjusted for the effects of restructuring and
management changes, increased from $77.1 million in fiscal 1996 to $85.5 million
in fiscal 1997, an increase of $8.4 million, primarily as a result of the
increase in operating income described above. Operating Cash Flow in fiscal 1997
was negatively affected by the effects of the restructuring provision of $10.7
million and expenses totaling approximately $5.4 million incurred in fiscal 1997
for consulting services in connection with establishing the restructuring plan,
the cessation of the former chief executive officer's employment, the hiring of
new and additional members of the executive management team, and for expenses
incurred in excess of the original provision for the consolidation of American
Tourister manufacturing facilities. The Company believes that the current level
of Operating Cash Flow is adequate to support its existing credit facilities and
service the Company's Series B Senior Subordinated Notes and other long-term
obligations.
Another measure of liquidity is net cash provided by continuing
operating activities before reorganization items, as reflected in the
consolidated statements of cash flows included elsewhere herein. Net cash
provided by continuing operating activities of $25.3 million in fiscal 1997,
$19.7 million in fiscal 1996 and $38.6 million in fiscal 1995, reflects net cash
from operations of the Company available for the Company's liquidity needs,
after taking into consideration the substantial costs of doing business not
reflected in Operating Cash Flow.
Cash flows provided by continuing operations increased by $5.7 million
in fiscal 1997 from fiscal 1996. Of this amount, $7.1 million resulted from an
increase in cash flow applied for working capital and other operating assets,
while cash flows from net income, adjusted for nonoperating and noncash charges
and discontinued operations, increased by $12.8 million.
Cash flow provided by (used in) investing activities decreased from
cash provided by investing activities in fiscal 1996 of $116.9 million to cash
used in investing activities in fiscal 1997 of $17.0 million, a decrease of
$133.9 million. Of this decrease, $112.0 million was caused by the nonrecurring
payment in fiscal 1996 from Culligan and proceeds from sale of assets decreased
by $12.8 million because of a nonrecurring sale of an investment in a television
station in fiscal 1996. Capital expenditures were $31.1 million in fiscal 1997
compared to $21.7 million in fiscal 1996. Capital expenditures in fiscal 1997
consist primarily of tooling for new products, warehouse expansion in Europe,
and capital expenditures in India for factory construction. Capital
expenditures of $5.6 million in 1997 were incurred in the less than 100% owned
subsidiaries in Italy, Singapore and India, and were therefore financed in part
by the other shareholders in the ventures.
Cash flows used in financing activities decreased from $169.4 million
in fiscal 1996 to $11.7 million in fiscal 1997, a decrease of $157.7 million.
Net short and long-term borrowings were reduced by $136.5 million in fiscal 1996
compared to a reduction in fiscal 1997 of $24.9 million. In fiscal 1996, the
Company used the proceeds from debt refinancing and cash flow from operations
which were spun-off or discontinued to reduce indebtedness, which accounts for
the lesser amount of debt retirement in fiscal 1997. The Company received $10
million from the collection of a note receivable from its former CEO in fiscal
1997 and also received $1.3 million from the sale of common stock to the current
CEO and the exercise of employee stock options.
At January 31, 1997, long-term obligations (including current
installments) were $290.6 million, representing a decrease of $20.3 million from
January 31, 1996. At January 31, 1997, the Company has $123.4 million of
available borrowings under its U.S. bank credit facility. In addition, the
Company's foreign subsidiaries have approximately $60 million available under
other short-term lines of credit.
At January 31, 1997, the Company had working capital of $105.4 million
compared to $99.5 million at January 31, 1996, an increase of $5.9 million.
Current assets increased by $22.8 million primarily due to an increase in
receivables of $15.1 million and an increase in inventories of $19.3 million,
both of which were offset by a net decrease in cash and other current assets of
$11.6 million. Receivables increased due to a higher sales level in fiscal 1997
compared to fiscal 1996. The increase in inventories occurred primarily in
domestic U.S. operations and resulted from inventories of new products,
primarily EZ CART (TM) upright luggage, and an increase in the number of retail
stores.
-26-
<PAGE>
On February 11, 1997, the Company completed the sale of 3,300,000
shares of its common stock in a public offering and received net proceeds
therefrom of approximately $130.4 million. In addition, the Company's former
Chief Executive Officer exercised stock options for which the Company received
approximately $6.6 million. The total of the proceeds from this offering and the
exercise of the stock options of approximately $137.0 million has been applied
as follows: (i) the Company has retired $80.8 million principal amount of its 11
1/8% Series B Senior Subordinated Notes for $89.5 million (which included
contractual and market redemption premiums of $8.7 million), (ii) the Company
paid $45.0 million on the term loan portion of the U.S. Senior Credit Facility,
and (iii) the remainder of the offering proceeds was applied to accrued interest
and to repay revolving credit borrowings under the Senior Credit Facility. The
debt repayment accomplished with the stock offering proceeds substantially
improves the Company's liquidity and debt position and will result in an
immediate decrease in cash required for interest expense estimated to be
approximately $12.2 million annually. The revolving credit line portion of the
U.S. Senior Credit Facility remains available to the Company. Management is
working to renegotiate or amend its U.S. credit facilities during the second
quarter of fiscal 1998 to reflect its improved financial condition as a result
of the public offering. In addition, the improvement in the Company's liquidity
will reduce interest rates charged under the U.S. Senior Credit Facility and
lower other fees charged under the facility.
The Company's cash flow from operations together with amounts
available under its credit facilities were sufficient to fund fiscal 1997
operations, scheduled payments of principal and interest on indebtedness and
capital expenditures. Management of the Company believes that cash flow from
operations and available borrowings under its credit facilities and new credit
facilities in emerging markets will be adequate to fund operating requirements
and expansion plans during the next 12 months. In addition, management currently
believes the Company will be able to meet long-term cash flow obligations from
cash provided by operations and other existing resources.
As discussed in note 13 to the consolidated financial statements, the
Company has a recorded liability of $26.6 million for claims associated with two
underfunded pension plans made by the Pension Benefit Guaranty Corporation as a
result of the reorganization of the Predecessor Company in 1993. Such amount
represents the maximum liability the Company would assume should certain events
occur. If the Company should ultimately be liable for such claims, management
believes that it would be able to satisfy the obligation through payment over an
extended period of time in a manner similar to the funding of a pension
liability and therefore it does not believe this matter will have a significant
effect on its liquidity. The Company has a recorded liability of $12.4 million
to holders of certain notes payable of the Predecessor Company for interest on
overdue installments of interest prior to the reorganization. The Company
continues to contest these claims and management of the Company believes the
ultimate resolution of this matter will not have a material adverse effect on
the Company's liquidity.
The Company's principal foreign operations are located in Western
Europe, the economies of which are not considered to be highly inflationary. The
economy in Mexico is considered highly inflationary beginning February 1, 1997.
The Company enters into foreign exchange contracts in order to hedge its
exposure on certain foreign operations through the use of forward delivery
commitments. During the past several years, the Company's most effective hedge
against foreign currency changes has been the foreign currency denominated debt
balances maintained in respect to its foreign operations. Geographic
concentrations of credit risk with respect to trade receivables are not
significant as a result of the diverse geographic areas covered by the Company's
operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary financial information
required by this Item and included in this Report are listed in the Index to
Consolidated Financial Statements and Schedule appearing on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
-27-
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS AND EXECUTIVE OFFICERS
The Company's directors and executive officers and their ages as of January
31, 1997 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Richard R. Nicolosi 49 President, Chief Executive Officer and Director
Thomas J. Leonard 47 President, Samsonite - the Americas
Luc Van Nevel 50 President, Samsonite International
John P. Murtagh 48 Chief Administrative Officer and Secretary
Thomas R. Sandler 50 Chief Financial Officer and Treasurer
Karlheinz Tretter 53 Vice-President and Managing Director of Samsonite
Europe
James E. Barch 40 Vice-President, Hardside Luggage and Business Cases
Robert P. Baird, Jr. 35 Vice-President, Softside Luggage and Casual Bags
Gary D. Ervick 47 President, Samsonite Distributing Company
D. Michael Clayton 47 Vice-President, Legal and Assistant Secretary
R. Theodore Ammon 47 Director
Bernard Attal 33 Director
Leon D. Black 45 Director
Robert H. Falk 58 Director
Carl C. Icahn* 60 Director
Mark H. Rachesky 38 Director
Robert L. Rosen 50 Director
Marc J. Rowan 34 Director
Stephen J. Solarz 56 Director
</TABLE>
*Mr. Icahn resigned as a Director effective March 26, 1997.
Richard R. Nicolosi. Mr. Nicolosi was appointed President and Chief
Executive Officer effective May 15, 1996. From 1994 to 1996, Mr. Nicolosi was
Senior Vice President of Scott Paper Company. From 1992 to 1994, Mr. Nicolosi
was President of Nicolosi & Associates, a privately owned business consulting
firm. From 1969 to 1992, Mr. Nicolosi was employed by Procter & Gamble in
various positions, the latest being President, Pulp and Paper Sector, Corporate
Group Vice President, as well as a member of the Executive Committee. He is a
member of the Advisory Board of Directors of Domino's Pizza, Inc.
Thomas J. Leonard. Mr. Leonard was appointed to his present position
as President, Samsonite-the Americas in May 1995. He served as President,
Samsonite North America from January 1994 through May 1995. He joined Samsonite
in 1984 as Vice President - Marketing, then became Vice President - Marketing
and Sales in 1985 before becoming Senior Vice President and General Manager of
Samsonite U.S.A. in June 1987. He was appointed as President, Samsonite U.S.A.
in July 1989. Prior to 1984, Mr. Leonard held sales and marketing management
positions for nine years with Wilson Sporting Goods and sales management
positions for four years with Procter & Gamble.
-28-
<PAGE>
Luc Van Nevel. Mr. Van Nevel was appointed to his present position
as President, Samsonite International in June 1994. Since 1984, he has held the
additional position of Managing Director of Samsonite Europe N.V., a wholly
owned subsidiary of Samsonite. He was appointed as President, Samsonite Europe
in July 1989. He joined Samsonite Europe N.V. in 1975 as Manager, Financial
Planning and progressed to the position of Controller of Samsonite Europe N.V.
Mr. Van Nevel worked in audit positions with Touche Ross & Co. in Europe for
five years before joining Samsonite.
John P. Murtagh. Mr. Murtagh joined Samsonite in August 1996 as Vice
President, Chief Administrative Officer and Secretary of the Company. He was
most recently Senior Vice President, General Counsel and Secretary of Scott
Paper Company from June 1994 through December 1995. Prior to June 1994, he
worked at International Paper as Director of Recycling programs in 1993 and
1994, and as Senior Counsel prior to 1993.
Thomas R. Sandler. Mr. Sandler has been Chief Financial Officer and
Treasurer of Samsonite since May 1, 1995. From July 1, 1994, he served as
managing partner of the Denver office of BDO Seidman, an international public
accounting firm. Prior to joining BDO Seidman, Mr. Sandler was an audit and
consulting partner in the international public accounting firm of KPMG Peat
Marwick LLP, specializing in corporate restructurings.
Karlheinz Tretter. Mr. Tretter was appointed Vice President and
Managing Director of Samsonite Europe in May 1994. Since 1990, Mr. Tretter has
served as Vice President of Marketing and/or Sales for Samsonite Europe.
James E. Barch. Mr. Barch was appointed Vice President and General
Manager of Hardside Luggage and Business Cases in August 1996. Mr. Barch was
Vice President, General Manager of Bath and Facial Tissue at Scott Paper Company
from 1994 to 1996. Prior to Scott Paper he was with Church & Dwight as Vice
President of Marketing and Vice President, General Manager of Personal Care
Products. He spent more than 13 years at Procter & Gamble in various positions
including as marketing manager for Procter & Gamble's hair care and skin care
products.
Robert P. Baird, Jr. Mr. Baird was appointed to his present position
as Vice President and General Manager of Softside Luggage and Casual Bags in
September 1996. Mr. Baird was responsible for marketing Cadillac Seville and
Eldorado for General Motors during 1996. From 1993 to 1995, Mr. Baird was
employed by Scott Paper in various positions, the latest being General Manager,
Wet Wipes division. Mr. Baird has also held leadership positions with Bristol-
Myers Squibb and Procter & Gamble.
Gary D. Ervick. Mr. Ervick was appointed President of the Samsonite
Distributing Company in September 1996. Mr. Ervick was President of American
Tourister from June 1995 until September 1996. From 1990 through 1995, he was
Vice President of Sales for the Chiquita Brands International, Inc. and prior to
1990 spent more than 15 years in various positions at Procter & Gamble.
D. Michael Clayton. Mr. Clayton has been General Counsel of
Samsonite since 1985 and Vice President - Legal since 1989. Mr. Clayton joined
Samsonite in 1974.
R. Theodore Ammon. Mr. Ammon has been Chairman of the Board and
Chief Executive Officer of Big Flower Press Holdings, Inc. since 1993. Mr.
Ammon was a General Partner of Kohlberg Kravis Roberts & Co. (a New York and San
Francisco-based investment firm) from 1990 to 1992, and an executive of such
firm prior to 1990. Mr. Ammon is also a member of the Board of Directors of
Host Marriott Corporation, Foodbrands America, Inc., and Culligan Water
Technologies, Inc. In addition, Mr. Ammon serves on the Board of Directors of
the New York YMCA, Jazz at Lincoln Center, Institute of International Education,
and on the Board of Trustees of Bucknell University.
-29-
<PAGE>
Bernard Attal. Mr Attal has been a director of the Company since
March 28, 1996, when the Board of Directors elected him to the Board. Mr. Attal
is President of Heights Advisors, which acts as a financial advisor and a
representative for certain European institutional investors with respect to
their investments in the United States. From 1992 to 1995, Mr. Attal was a Vice
President at Credit Lyonnais Securities. Prior to 1992, Mr. Attal was Chief
Financial Officer of Altus Patrimoine & Gestion, a money management firm. Mr.
Attal is a director of New California Life Holdings, Inc., Culligan Water
Technologies, Inc. and the Florsheim Group, Inc.
Leon D. Black. Mr. Black is one of the founding principals of Apollo
Advisors, L.P., which, together with its affiliates, acts as managing general
partner of Apollo Investment Fund, L.P., AIF II, L.P. and Apollo Investment Fund
III, L.P., private securities investment funds, and Lion Advisors, L.P., which
acts as financial advisor to and representative for certain institutional
investors with respect to securities investments, and of Apollo Real Estate
Advisors, L.P., which serves as managing general partner of Apollo Real Estate
Investment Fund, L.P., a private real estate oriented investment fund. Mr.
Black is a director of Big Flower Press, Inc., Converse, Inc., Furniture Brands
International, Inc., Vail Resorts, Inc., Telemundo Group, Inc. and Culligan
Water Technologies, Inc.
Robert H. Falk. Mr. Falk has been an officer since April 1992 of
Apollo Capital Management, Inc. and Lion Capital Management, Inc., which
respectively act as general partners of Apollo Advisors, L.P. and Lion Advisors,
L.P. Mr. Falk is a limited partner of Apollo Advisors, L.P., which, together
with its affiliates, acts as managing general partner of Apollo Investment Fund,
L.P., AIF II, L.P. and Apollo Investment Fund III, L.P., private securities
investment funds, and a limited partner of Lion Advisors, L.P., which acts as
financial advisor to and representative for certain institutional investors with
respect to securities investments. Prior to 1992, Mr. Falk was a partner in the
law firm of Skadden, Arps, Slate, Meagher & Flom LLP. Mr. Falk is a director of
Converse, Inc., Culligan Water Technologies, Inc., the Florsheim Group, Inc. and
Salant Corporation.
Carl C. Icahn. Mr. Icahn is, and for more than five years has been,
Chief Executive Officer and Chairman of the Board of Directors of Starfire
Holding Corporation, which he owns, and various of its affiliated corporations,
including ACF Industries, Incorporated and, since November 1990, the General
Partner of American Real Estate Partners, L.P. For more than five years prior
to January 8, 1993, Mr. Icahn was Chairman and Chief Executive Officer of Trans
World Airlines, Inc. Mr. Icahn is a director of Culligan Water Technologies,
Inc. and Cadus Pharmaceutical Corporation. ACF Industries is a manufacturer of
tank and covered hopper cars and engages in the leasing and management of such
cars. Trans World Airlines, Inc. ("TWA") is an international air carrier. In
January 1992 TWA filed for reorganization under Chapter 11 of the United States
Bankruptcy Code and was reorganized in 1993. Mr. Icahn has, directly and
through his controlled companies, been an investor in equity and debt securities
of third party issuers, in certain instances seeking control of such issuers.
Mr. Icahn resigned as a Director effective March 26, 1997.
Mark H. Rachesky, M.D. Dr. Rachesky has been a director of the
Company since 1993. Dr. Rachesky is the founder of MHR Capital Partners LP, an
investment fund targeted toward individual investors which invests in distressed
securities, and is currently forming similar investment funds for institutional
investors and off-shore investors. Dr. Rachesky is the principal owner and
manager of MHR Advisors LLC and MHR Management Company LLC, the general partner
and investment manager, respectively, of MHR Capital Partners LP. From February
1, 1990 through June 11, 1996, Dr. Rachesky was employed by Starfire Holding
Corporation, a holding company for Carl C. Icahn's investments, where he served
as senior investment advisor and, for the last three years, as sole Managing
Director, and, in such capacity, acted as Mr. Icahn's chief investment advisor.
Dr. Rachesky has served as a director of Culligan Water Technologies, Inc. since
September 1995 and of Cadus Pharmaceutical Corporation since August 1993. From
June 1987 to January 1990, Dr. Rachesky was employed by an affiliate of the
Robert M. Bass Group, where he was involved in financing and investing activity.
-30-
<PAGE>
Robert L. Rosen. Mr. Rosen is Chief Executive Officer of RLR
Partners, LLC, a private investment partnership founded in April 1987. Since
1987, Mr. Rosen has been Chairman of the Board and Chief Executive Officer of
Damon Corporation and its predecessor which operates one of the leading clinical
laboratory testing networks in the United States. Damon Corporation was
acquired by Corning, Inc. on August 4, 1993. Since 1993, Mr. Rosen has been a
director of the Municipal Advantage Fund, Inc., Municipal Partners Fund, Inc.,
Municipal Partners Fund II, Inc. and the Spring Mountain Group. Mr. Rosen is a
director of Culligan Water Technologies, Inc., Dialysis Centers of America,
Jewish Television Network, and AFP Imaging Corp.
Marc J. Rowan. Mr. Rowan is one of the founding principals of Apollo
Advisors, L.P., which, together with its affiliates, acts as managing general
partner of Apollo Investment Fund, L.P., AIF II, L.P. and Apollo Investment Fund
III, L.P., private securities investment funds, and of Lion Advisors, L.P.,
which acts as financial advisor to and representative for certain institutional
investors with respect to securities investment. Mr. Rowan is also a director
of Culligan Water Technologies, Inc., Farley, Inc., Furniture Brands
International, Inc. and Vail Resorts, Inc.
Stephen J. Solarz. Mr. Solarz was elected, in 1974, to the House of
Representatives from Brooklyn's 13th Congressional District and was re-elected
eight times. In the House he served on four committees: Foreign Affairs,
Merchant Marine and Fisheries, Intelligence, and the Joint Economic Committee.
Mr. Solarz ranked fourth in seniority on the House Foreign Affairs Committee,
where he chaired the Subcommittee on Asian and Pacific Affairs. Since his
departure from the House, Mr. Solarz has been: Senior Counselor at APCO
Associates, an international public affairs firm; President of Solarz and
Associates, a global consulting firm; Chairman of the Central Asian American
Enterprise Fund; Vice Chairman of the International Crisis Group; a
Distinguished Fellow at the Carnegie Endowment for International Peace;
Professor of International Affairs at George Washington University; a Member of
the Board of Directors of the Brandeis University Board of Trustees as well as
the National Endowment for Democracy and National Democratic Institute, and a
member of the Council on Foreign Relations and the International Rescue
Committee. Mr. Solarz is a director of Culligan Water Technologies, First
Philippine Fund and Geophone.
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors of the Company
(the "Committee") reviews and approves the salaries and bonuses of the executive
officers of the Company as well as all grants of options to purchase shares of
Common Stock and other equity-based compensation awards.
Objectives.
The Committee's primary objectives are to retain the best qualified
people and to insure that they are properly motivated to have the Company
prosper over the long term. In furtherance of the foregoing, the Committee, in
establishing the components and levels of compensation for its executive
officers, seeks (i) to enable the Company to attract and retain highly qualified
executives and (ii) to provide financial incentives in the form of cash bonuses
and equity compensation in order to align the interests of executive officers
more closely with those of the stockholders of the Company and to motivate such
executives to increase stockholder value by improving corporate performance and
profitability.
-31-
<PAGE>
Employment Agreements.
The Company has entered into employment agreements with certain of its
executive officers, including each of the named executive officers listed in the
Summary Compensation Table on page 33. The Committee has considered the
advisability of using employment agreements and has determined that the use of
employment agreements is in the best interest of the Company because it
facilitates (consistent with the Committee's overall objectives) the Company's
ability to attract and retain the services of the most highly qualified
executive officers. The Committee has observed that the use of employment
agreements by the Company has provided long-term stability to the Company's team
of senior executive officers, and the Committee has determined that the practice
of using employment agreements to retain the services of such senior executive
officers should continue in the future. Each such employment agreement
separately reflects the terms that the Committee felt were appropriate and/or
necessary to retain the services of the particular executive.
Components of Executive Compensation.
There are two components of the Company's executive compensation
program:
. Cash compensation.
. Equity compensation.
Cash Compensation.
Cash compensation is comprised of base salary and annual cash
incentive bonuses. Since, as noted above, each of the named executive officers
of the Company was a party to an employment agreement with the Company effective
during the past fiscal year, their respective cash compensation levels were
subject to the provisions of such employment agreements. The Committee
subjectively arrived at appropriate base salary compensation levels in the
process of negotiating such agreements.
The Company offers each of its executive officers an opportunity to
earn additional cash compensation in the form of annual bonuses that are awarded
if the Company attains specified performance goals or if the officer
satisfactorily completes certain annual projects approved by the Committee. The
Committee believes that making a significant portion of executive officer
compensation subject to the Company attaining specified performance goals or the
successful completion of specified projects motivates the executive officers to
increase their individual efforts on behalf of the Company. The Committee also
believes that it is appropriate that the Company's executive officers receive
lower compensation when the Company does not attain its specified performance
goals and higher compensation when the Company attains such goals.
Annual bonus amounts for the named executive officers were determined
pursuant to terms provided in their respective employment agreements and, as
noted above, were conditioned on the Company's attainment of specified
performance goals or the officer's satisfactory completion of certain annual
projects approved by the Committee.
Equity Compensation.
Equity compensation is comprised of stock options, restricted stock
awards, and stock bonus awards. Stock option grants reflect the Committee's
desire to provide a meaningful equity incentive for the executive to have the
Company prosper over the long term. The Committee expects options to continue
as a significant component of the executive compensation arrangements of the
Company in the future. In that connection, options to purchase 804,284 shares
were granted to certain Named Executive Officers of the Company as described
elsewhere herein, and options to purchase 1,949,858 shares were granted to other
officers and key employees of the Company and its subsidiaries.
-32-
<PAGE>
Chief Executive Officer Compensation
In fiscal 1997, the compensation of Mr. Nicolosi was determined
pursuant to the Nicolosi Agreement described in "Employment Contracts and
Termination of Employment and Change-in-Control Arrangements." The Committee
approved an annual bonus for Mr. Nicolosi for fiscal 1997 in the amount of
$500,000 due to Mr. Nicolosi's significant progress in developing and beginning
the implementation of strategic initiatives to improve the Company's
performance.
In fiscal 1997, the Compensation Committee of the Board of Directors
consisted of:
R. Theodore Ammon
Robert H. Falk
Carl C. Icahn
Marc J. Rowan
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid or awarded to
Richard R. Nicolosi, Chief Executive Officer ("CEO") of the Company, Steven J.
Green, former CEO, and the other four most highly compensated executive officers
of the Company during the last fiscal year (collectively, the "Named
Executives") for services rendered in all capacities for the last three fiscal
years.
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards
------------------------------------------------------- --------------------------
Other Restricted
Annual Stock Securities All Other
Salary Bonus Compensation Awards Underlying Compensation
Name/Principal Position Year(a) ($) ($) ($) ($) Options/SARs(#) ($)(f)
- ----------------------- ------------ ------------ -------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard R. Nicolosi........ 1997 $425,000 $500,000 $112,500(c) $1,095,000(d) 425,532 $ 109,034
President, CEO, and 1996 -- -- -- -- --
Director 1995 -- -- -- -- --
Steven J. Green............ 1997 178,692 -- -- -- -- 2,016,253
Former Chairman of the 1996 600,000 -- -- -- 2,153,668 13,060
Board, President and CEO* 1995 600,000 500,000 -- -- -- 9,026
Thomas J. Leonard.......... 1997 250,000 187,500 -- 709,724(e) 98,619 6,316
President, Samsonite - 1996 250,000 125,000 -- -- 7,260
the Americas 1995 250,000 250,500 -- -- 6,657
Luc Van Nevel(b)........... 1997 290,980 275,000 -- 709,724(e) 98,619 102,704
President, Samsonite 1996 306,331 153,165 -- -- 31,001
International 1995 271,330 250,000 -- -- 22,227
Thomas R. Sandler.......... 1997 200,000 220,000 -- 709,724(e) 98,619 5,968
Chief Financial Officer 1996 150,000 100,000 -- -- 6,156
and Treasurer
Gary D. Ervick............. 1997 202,961 172,600 -- -- 82,895 8,943
President, Samsonite 1996 114,928 61,250 -- -- -- --
Distributing Company 1995 -- -- -- -- -- --
</TABLE>
- ------------------------
* Effective May 15, 1996, the employment of Mr. Green as Chairman of the Board,
President and CEO ceased and effective May 21, 1996 he resigned from the Board
of Directors and its committees. He was succeeded as Chief Executive Officer
and President by Richard R. Nicolosi.
-33-
<PAGE>
(a) Fiscal year ending January 31.
(b) Mr. Van Nevel's base salary is 9,000,000 Belgian francs for each of the
three fiscal years ended January 31, 1997. His salary, bonuses, and all
other compensation amounts, to the extent denominated in Belgian francs,
have been translated to U.S. dollars at rates of 30.93, 29.38, and 33.17
francs to the U.S. dollar for the years ended January 31, 1997, 1996, and
1995, respectively.
(c) Consists of amounts paid during the year for a housing allowance at the
rate of $12,500 per month.
(d) The Company issued 60,000 shares of restricted stock to Mr. Nicolosi on May
15, 1996 pursuant to the terms of his employment agreement (see "Employment
Contracts and Termination of Employment and Change-in-Control
Arrangements"). The market value of the stock at May 15, 1996 was $18.25
per share.
(e ) Effective as of May 15, 1996, the Company entered into agreements with
Messrs. Leonard, Van Nevel, and Sandler that provide for stock bonuses to
each of them of 38,889 shares of common stock. The market value of the
stock at May 15, 1996 was $18.25 per share. See "Employment Contracts and
Termination of Employment and Change-in-Control Arrangements".
(f) Represents the following amounts paid by the Company for the benefit of the
named executive:
<TABLE>
<CAPTION>
Life
insurance
Company premium
Relocation Severance contribution to and excess
Name Year(i) allowance payment 401(k) Plan medical
- ---- ------- ---------- -------------- --------------- ----------
<S> <C> <C> <C> <C> <C>
Mr. Nicolosi.................................................... 1997 $100,000 -- $6,250 $ 2,784
Mr. Green....................................................... 1997 -- $2,000,033(ii) 4,500 11,720
Mr. Leonard..................................................... 1997 -- -- 4,750 1,566
Mr. Van Nevel(iii).............................................. 1997 -- -- -- --
Mr. Sandler..................................................... 1997 -- -- 4,750 1,218
Mr. Ervick...................................................... 1997 -- -- 7,958 985
</TABLE>
(i) Fiscal year ending January 31.
(ii) Consists of amounts paid during the year for severance pursuant to an
employment agreement with Mr. Green. See "Employment Contracts and
Termination of Employment and Change-in-Control Agreements."
(iii) Mr. Van Nevel participates in an employee benefit arrangement available
to employees of the Company located in Belgium, which combines
retirement and life insurance benefits based on salary is contributed by
the Company on behalf of such employees in order to purchase insurance
contracts that contain both a life insurance and retirement pension
provision. In fiscal 1997, $102,704 was contributed on behalf of Mr. Van
Nevel.
-34-
<PAGE>
The following table discloses the grants of stock options during fiscal 1997 to
Named Executives.
OPTION/SAR GRANTS IN FISCAL YEAR 1997
<TABLE>
<CAPTION>
Potential realizable
value at assumed
annual rates of stock
price appreciation for
Individual Grants option term
------------------------------------------------------------------------- -----------------------
Number of % of Total
Securities Options/SARs Exercise
Underlying Granted to or Base
Options/SARs Employees in Price
Name Granted (#) Fiscal Year ($/Sh) Expiration Date 5% ($) 10% ($)
- ---- ----------------- ---------------------- -------- ----------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Mr. Nicolosi 425,532 15.45% 18.25 May 15, 2001 2,145,000 4,740,000
Mr. Leonard 98,619 3.58% 10.875 February 20, 2002 364,000 828,000
Mr. Luc Van Nevel 98,619 3.58% 10.875 February 20, 2002 364,000 828,000
Mr. Sandler Grant 1 73,964 2.69% 12.875 February 20, 2002 324,000 735,000
Grant 2 24,655 .89% 35.50 October 29, 2002 298,000 675,000
Mr. Ervick Grant 1 12,895 .47% 13.875 March 28, 2002 61,000 138,000
Grant 2 40,000 1.45% 18.50 August 21, 2002 252,000 571,000
Grant 3 30,000 1.09% 41.50 January 16, 2003 423,000 961,000
</TABLE>
The following table discloses, for the Named Executives, information
regarding stock options that were held at January 31, 1997.
FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Options/SARs in-the-money Options/SARs
at Fiscal Year-End (#) at Fiscal Year End ($)
Name Exercisable/Unexercisable Exercisable/Unexercisable(a)
- ---- ------------------------- ----------------------------
<S> <C> <C>
Mr. Nicolosi 0/425,532 0/9,043,000
Mr. Leonard 19,724/78,895 565,000/2,258,000
Mr. Van Nevel 19,724/78,895 565,000/2,258,000
Mr. Sandler 23,011/75,608 427,000/1,641,000
Mr. Ervick 18,491/64,404 412,000/758,000
</TABLE>
(a) Total value of options based on fair market value of common stock of $39.50
as of January 31, 1997. There were no awards under long-term incentive
plans, other than stock options and awards granted, to any Named Executives
in fiscal 1997. The Named Executives did not acquire any shares through
the exercise of options in fiscal 1997.
-35-
<PAGE>
PENSION PLAN TABLE
The U.S. executives are participants in the Samsonite Retirement Income
Plan (the "Samsonite Pension Plan") and the Supplementary Executive Retirement
Plan (the "SERP"). The Samsonite Pension Plan is a qualified defined benefit
plan which provides benefits to the participants retiring at normal retirement
age calculated based on years of service and average compensation (as defined by
the pension plan), net of offsets for Social Security benefits. The SERP, which
is a nonqualified unfunded plan, was adopted on December 1, 1995 and provides to
eligible executives retirement benefits on compensation and benefits in excess
of Internal Revenue Code maximums for qualified plans.
The following table shows the estimated hypothetical annual benefits
payable pursuant to the Samsonite Pension Plan and the SERP to persons retiring
at their normal retirement age in 1997 in specified eligible compensation and
years of service classifications.
<TABLE>
<CAPTION>
Years of Service
-----------------------------------------------
Remuneration 15 20 25 30 35
- ------------ ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000 $24,542 $ 32,723 $ 40,904 $ 49,084 $ 57,663
150,000 30,167 40,223 50,279 60,334 70,788
175,000 35,792 47,723 59,645 71,584 83,913
200,000 41,417 55,223 69,029 82,834 97,038
225,000 47,042 62,723 78,404 94,084 110,163
250,000 52,667 70,223 87,779 105,334 123,288
300,000 63,917 85,223 106,529 127,834 149,538
400,000 75,167 100,223 125,279 150,334 175,788
450,000 75,167 100,223 125,279 150,334 175,788
500,000 75,167 100,223 125,279 150,334 175,788
550,000 75,167 100,223 125,279 150,334 175,788
600,000 75,167 100,223 125,279 150,334 175,788
</TABLE>
Compensation covered by the above Plans is total cash compensation paid,
including any amount contributed under a Section 401(k) plan. The benefits
shown above are payable on a life annuity basis and are not subject to any
offset amounts.
Mr. Nicolosi, Mr. Leonard, Mr. Sandler and Mr. Ervick have accrued 1, 12, 2
and 2 year(s), respectively, of service credit under the Samsonite Pension Plan
and the SERP.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Richard R. Nicolosi. The Company has entered into an employment agreement,
effective as of May 15, 1996, with Richard R. Nicolosi (the "Nicolosi
Agreement"), pursuant to which Mr. Nicolosi will serve as President and Chief
Executive Officer of the Company for a two-year term commencing on the effective
date of the Nicolosi Agreement.
The Nicolosi Agreement provides Mr. Nicolosi with, among other things, an
annual base salary of $600,000 and an opportunity to receive an annual incentive
bonus of $500,000 (80% of which has been guaranteed for the first year) if the
Company attains certain performance goals. In connection with the Nicolosi
Agreement, the Company has granted Mr. Nicolosi
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options to purchase 425,532 shares of Common Stock at an exercise price
of $18.25 per share (subject to customary antidilution adjustments). Options to
purchase 186,170 shares of Common Stock (the "Series A Options") are time-
vesting options and options to purchase 239,362 shares of Common Stock (the
"Series B Options") subject to certain performance requirements with respect to
accelerated vesting. The options have a five year term. Fifty percent (50%) of
the Series A Options will vest on May 15, 1997 and the remaining fifty percent
(50%) will vest on May 15, 1998, so long as Mr. Nicolosi remains continually
employed by the Company through such date. All of the Series B options shall
vest on April 15, 2001, so long as he remains continually employed by the
Company through April 15, 2001, subject to accelerated performance based vesting
as follows. The Series B Options will vest on May 15, 1998 if Mr. Nicolosi
remains continually employed by the Company through such date and the average
market value of the Common Stock equals or exceeds $30.00 per share in any
period of 30 consecutive days prior to May 15, 1998. Notwithstanding the
foregoing, if a change of control event occurs prior to May 15, 1998 and if Mr.
Nicolosi remains continually employed by the Company through the date of such
event, (i) all of the Series A Options will automatically vest and (ii) all of
the Series B Options will vest if either (a) the average market value of the
Common Stock in any period of 30 consecutive days prior to such event or (b) the
market value of the Common Stock as of the date of such event, equals or exceeds
$30.00 per share. During fiscal 1997, the market value of the Company's Common
Stock did exceed $30.00 per share for 30 consecutive days.
Also in connection with the performance by Mr. Nicolosi of services
pursuant to the Nicolosi Agreement, the Company has agreed to issue to Mr.
Nicolosi 60,000 shares of restricted Common Stock (the "Restricted Shares").
Fifty percent (50%) of the Restricted Shares will vest on May 15, 1997 and the
remaining fifty percent (50%) will vest on May 15, 1998; provided that if a
change of control event occurs and Mr. Nicolosi remains continually employed by
the Company through the date of such event, then all Restricted Shares that have
not vested will become vested as of the date of such event.
Pursuant to a separate agreement with Mr. Nicolosi, the Company has sold
and issued to Mr. Nicolosi 55,000 shares of Common Stock at a purchase price of
$18.25 per share (the market price at the date of the sale), or an aggregate
purchase price of $1,003,750.
The Nicolosi Agreement also provides Mr. Nicolosi with participation in
certain employee benefit plans and arrangements on the same basis as other
executive officers of the Company and contains customary provisions regarding
reimbursement of legal fees and business expenses and for reimbursement of
certain other expenses (including a one-time relocation allowance of $100,000
and a housing allowance at the rate of $12,500 per month), and indemnification
with respect to actions taken by Mr. Nicolosi in his capacity as an officer of
the Company.
If the Company terminates Mr. Nicolosi's employment without Cause (as
defined in the Nicolosi Agreement) (other than for disability), or if Mr.
Nicolosi terminates his employment for Good Reason (as defined in the Nicolosi
Agreement), then (1) the Company will be required to pay Mr. Nicolosi a lump sum
severance payment of $1 million, (2) until Mr. Nicolosi becomes eligible for
coverage under another employer's benefit plans, the Company will allow Mr.
Nicolosi to continue to par ticipate, for the remainder of the term of the
Nicolosi Agreement, in all Company benefit plans, provided such participation is
permissible under the general terms and provisions of those plans, (3) fifty
percent (50%) of the Restricted Shares and fifty percent (50%) of the Series A
Options will vest if the date of termination is on or prior to May 15, 1997 and
all of the Restricted Shares and Series A Options will vest if the date of
termination is after May 15, 1997 and (4) all of the Series B Options will vest
if either (a) the average market value of the Common Stock in any period of 30
consecutive days prior to the date of termi nation or (b) the market value of
the Common Stock as of the date of termination, equals or exceeds $30.00 per
share; provided that if a change of control event occurs within 180 days after
the date of termination and either the average market value of the Common Stock
in any period of 30 consecutive days prior to such event or the market value of
the Common Stock as of the date of such event, equals or exceeds $30.00 per
share, all of the Restricted Shares, Series A Options and Series B Options will
vest as of the date of such change of control event.
The Nicolosi Agreement provides that during Mr. Nicolosi's employment with
the Company and for a period of two years thereafter, Mr. Nicolosi will not,
directly or indirectly, as a principal, officer, director, employee or in any
other capacity whatsoever, without the prior written consent of the Company,
engage in, or be or become interested or acquire any ownership of any kind in,
or become associate with, or make loans or advance property to any person
engaged in or about to engage in, any
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business activity which is competitive with any of the businesses engaged in
by the Company in any of the geographic areas in which such businesses have been
conducted by the Company during the last twelve months of his employment.
Making or holding any investment in any amount in securities traded on any
national securities exchange or traded in the over the counter market, provided
said investments do not exceed 1% of the issued and outstanding stock of any one
such corporation, will not constitute a violation of the foregoing
noncompetition agreement. The Nicolosi Agreement also limits the amount of
additional shares of Common Stock that Mr. Nicolosi can purchase without the
consent of the Board of Directors of the Company, and it restricts him from
becoming involved in proxy contests or takeover proposals and certain similar
activities with respect to the Company except on behalf of the Company.
Steven J. Green. Effective as of April 13, 1995, the Company entered into
an employment agreement with Steven J. Green (the "Green Agreement") for a five-
year term (the "Term"). Effective May 15, 1996, the employment of Mr. Green as
Chairman of the Board, Chief Executive Officer and President ceased as he was
succeeded as Chief Executive Officer by Richard R. Nicolosi. Mr. Green resigned
as a Director effective May 21, 1996.
The Green Agreement provided Mr. Green with, among other things, an annual
base salary of $600,000 and an opportunity to receive an annual incentive bonus
of $500,000 if the Company attains certain performance goals. In connection
with the Green Agreement, the Company granted Mr. Green options to purchase
500,000 shares of Common Stock at an exercise price of $24.85 per share, as
adjusted by the terms of the option agreement for the spinoff transaction in
fiscal 1996, and options to purchase 1,000,000 shares of Common Stock at an
exercise price of $32.85 per share, as adjusted by the terms of the option
agreement for the spinoff transaction in fiscal 1996 (collectively, the "New
Options"). The option agreement provided the New Options to become exercisable
on an accelerated basis if the Company attained certain performance goals
related to the Company's consolidated earnings before interest and income taxes;
otherwise the New Options were to vest on February 1, 2005 if Mr. Green remained
continually employed by the Company. Options for 300,000 shares lapsed as of
January 31, 1996 and the remaining options for 1,200,000 shares became
exercisable upon Mr. Green's cessation of employment. Such options were
exercised on February 11, 1997.
Also in connection with the performance by Mr. Green of services pursuant
to the Green Agreement, Mr. Green purchased from the Company 425,532 shares of
Common Stock (the "Purchased Shares") at a price of $23.50 per share (the market
price per share of the Common Stock on the date that an agreement in principle
was reached) in exchange for his $10 million promissory note (the "Promissory
Note") which was paid in October 1996.
The Green Agreement also provided Mr. Green with participation in certain
employee benefit plans and arrangements on the same basis as other executive
officers of the Company and contains customary provisions regarding
reimbursement of legal fees and other business expenses, and indemnification
with respect to actions taken by Mr. Green in his capacity as an officer of the
Company.
Under a previous agreement (the "Prior Green Agreement"), Mr. Green was
granted 463,918 shares of restricted Common Stock (the "Restricted Stock") and
options to purchase 840,430 shares of Common Stock at an exercise price of
$20.25 per share (the "Old Options"). Pursuant to the Green Agreement, all the
Restricted Stock and 7/9ths (653,668 shares) of the Old Options vested on the
effective date of the Green Agreement. Such amounts of Restricted Stock and Old
Options are equal to the amounts of Restricted Stock and Old Options that would
have vested under the Prior Green Agreement as of June 1995, assuming in the
case of the Old Options that the performance goals under the Prior Green
Agreement were satisfied. The 2/9ths balance of the Old Options have been
canceled. The option price of $20.25 for the old options was adjusted to $11.87
per share in fiscal 1996 for the spinoff transaction. Such options were
exercised on February 11, 1997.
Upon certain types of termination of Mr. Green's employment with the
Company (e.g., a termination by the Company for any reason other than Cause (as
defined in the Green Agreement) or a termination by Mr. Green constituting Good
Reason (as defined in the Green Agreement)), the Green Agreement provided for
certain severance benefits including (i) a lump sum payment (discounted to
reflect accelerated payment) in lieu of the incentive bonus equal to the lesser
of (A) the aggregate incentive bonus payable in respect of each fiscal year
remaining in the term of the Green Agreement and (B) $1,000,000 and (ii) a lump
sum payment (discounted to reflect accelerated payment) equal to the lesser of
(C) the aggregate amount of all
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<PAGE>
remaining salary payments for the remainder of the term of the Green Agreement
and (D) the annual base salary in effect as of the date of termination
multiplied by two. In addition, Mr. Green is entitled to continue receiving
employee benefits under each employee benefit plan of the Company in which he
participates as of the date of termination of employment until the earlier to
occur of (i) the last day of the term of the Green Agreement and (ii) the second
anniversary of the date of termination of employment. Moreover, upon such
termination of Mr. Green's employment, all the options granted in connection
with the Green Agreement became immediately and fully exercisable except those
options that did not become vested because the applicable performance goals had
not been attained. Mr. Green was paid severance of $2,000,033 under these terms
of the Green Agreement.
The Green Agreement contains confidentiality and noncompetition provisions
that prevent Mr. Green from disclosing confidential information about the
Company and from competing with the Company during the term of his employment
and for two years following termination of his employment. The Green Agreement
also limits the amount of additional shares of Common Stock that Mr. Green can
purchase without the consent of the Board of Directors of the Company, and it
restricts him from becoming involved in proxy contests or takeover proposals and
certain similar activities with respect to the Company except on behalf of the
Company.
Thomas J. Leonard. The Company has entered into an employment agreement
(the "Leonard Agreement") with Mr. Leonard, effective as of April 18, 1995.
Pursuant to the Leonard Agreement, Mr. Leonard will serve as executive of the
Company for a five-year term expiring on April 17, 2000. The Leonard Agreement
provides for an annual salary of $250,000, adjusted annually for Consumer Price
Index increases, with no adjustment for decreases. Mr. Leonard is eligible to
receive an incentive bonus of up to 120% of his annual salary if the Company
attains certain performance goals. Up to 50% of this incentive bonus is payable
if Mr. Leonard satisfactorily completes certain annual projects prescribed by
the Board. For fiscal 1998, the Committee has approved an increase in the
maximum achievable incentive bonus to as much as 200% of annual salary provided
certain Company-wide performance levels are achieved. The Leonard Agreement
provides for participation in all Company pension, welfare, savings, and other
benefit and insurance plans on the same basis as other executive officers. The
Leonard Agreement provides that if the Company terminates Mr. Leonard's
employment without Cause (as defined in the Leonard Agreement), or if Mr.
Leonard terminates his employment for Good Reason (as defined in the agreement),
then (1) the Company will be required to pay Mr. Leonard an amount equal to the
greater of (a) $500,000 or (b) the product of $41,667 times the lesser of 18 or
the number of months remaining in the term of the Leonard Agreement and (2)
until Mr. Leonard becomes eligible for coverage under another employer's benefit
plans, the Company will allow Mr. Leonard to continue to participate, for the
number of years remaining in the term of the Leonard Agreement, in all Company
benefit plans, provided such participation is permissible under the general
terms and provisions of those plans. The Leonard Agreement provides that in the
event the agreement continues in effect until the end of its term, and the
Company has not offered continued employment to Mr. Leonard on substantially
similar terms or the parties otherwise fail to reach a mutual agreement for an
extension of Mr. Leonard's employment, the Company will be required to pay Mr.
Leonard $250,000. The Leonard Agreement contains customary provisions regarding
reimbursement of legal fees and certain other expenses, and indemnification with
respect to actions taken by Mr. Leonard in his capacity as an officer of the
Company. The Leonard Agreement provides that during Mr. Leonard's employment
with the Company and for a period of one year thereafter, Mr. Leonard will not,
directly or indirectly, as a principal, officer, director, employee or in any
other capacity whatsoever, without the prior written consent of the Company,
engage in, or be or become interested or acquire any ownership of any kind in,
or become associated with, or make loans or advance property to any person
engaged in or about to engage in, any business activity which is competitive
with any of the businesses then engaged in by the Company in any of the
geographic areas in which such businesses have been conducted by the Company
during the last twelve months of his employment. Making or holding any
investment in any amount in securities traded on any national securities
exchange or traded in the over-the-counter market, provided said investments do
not exceed 1% of the issued and outstanding stock of any one such corporation,
will not constitute a violation of the foregoing noncompetition agreement.
On February 20, 1996, Mr. Leonard was granted options under the Company's
1995 Stock Option and Incentive Award Plan to purchase 98,619 shares of the
Company's Common Stock at a price of $10.875 per share, the market price per
share of Common Stock at the date of grant. The options have a six-year term.
The options are exercisable 20% at the date of grant with the remaining options
becoming exercisable ratably over a four-year period from the date of the grant.
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<PAGE>
Effective as of May 15, 1996, the Company entered into an agreement with
Mr. Leonard that provides for a stock bonus of 38,889 shares of Common Stock
(the "Bonus Shares"), payable if Mr. Leonard remains continually employed by the
Company through the earlier of the third anniversary of the date of the
agreement and the first anniversary of a change of con trol event; provided that
if Mr. Leonard's employment is terminated prior to such date (i) due to death,
(ii) by the Company other than for "Cause or disability", as defined, or (iii)
by the executive for Good Reason, as defined, then notwithstanding such
termination of employment, such bonus shall be payable not later than 30 days
following such termination, and the Company will have the option of making such
payment either in the form of Bonus Shares or in cash in an amount equal to the
market value of the Bonus Shares at the time. The agreements also provide that
if a change of control event occurs, all options to purchase Common Stock
previously granted to Mr. Leonard shall vest on the first anniversary of the
date on which such event occurs (to the extent such options shall not have
otherwise vested as of such first anniversary date), so long as Mr. Leonard
remains continually employed by the Company through such first anniversary date.
Luc Van Nevel. The Company has entered into an Executive Management
Agreement, as amended, effective May 1, 1994 (the "Management Agreement") with
Mr. Luc Van Nevel for a term commencing on January 1, 1990 and continuing at the
pleasure of the Company's Board of Directors in accordance with its bylaws or
until the first to occur of Mr. Van Nevel's resignation, removal, death or
disability. Under the Management Agreement, Mr. Van Nevel agrees to devote all
necessary business time, energy and skill to the affairs of the Company, except
for time devoted to the affairs of the Company's subsidiaries. The Management
Agreement provides for annual salary and expenses of $115,000. The Management
Agreement provides that upon Mr. Van Nevel's death, Termination for Cause or
Voluntary Termination (each as defined in the Management Agreement), the Company
will be required to pay Mr. Van Nevel all accrued salary and appropriate
business expenses to the date of death or termination. In the event of Mr. Van
Nevel's disability which renders him incapable of performing his duties for a
period of more than one month, the Company may terminate Mr. Van Nevel's
employment after paying Mr. Van Nevel all accrued salary and appropriate
business expenses. Upon Termination Other Than for Cause (as defined in the
Management Agreement), the Company will be required to pay Mr. Van Nevel (a) all
accrued salary and appropriate business expenses to the date of termination and
(b) severance compensation in an amount equal to Mr. Van Nevel's one month
salary. The Management Agreement provides that during Mr. Van Nevel's
employment with the Company and for a period of two years after his employment
with the Company ends, he will not, either alone or in any capacity with another
firm (i) in any way interfere or attempt to interfere with the Company's
relationships with any of its current or potential customers in the United
States or Europe, (ii) employ or attempt to employ any of the then employees of
the Company on behalf of any other competing entity in the United States or
Europe or (iii) directly or indirectly engage in the manufacturing or marketing
of any product, device or process which the Company manufactured or marketed as
of the date his employment with the Company ends, or any product, device or
process substantially similar thereto, or having substantially the same use as
such product, device or process, or competitive therewith in the United States
or Europe. Owning, as an inactive investor, securities in any competitor
corporation listed on a national securities exchange or publicly traded in the
over-the-counter market, provided said investments do not exceed 1% of the
voting stock of such corporation, will not constitute a violation of the
foregoing noncompetition agreement. In January 1990, Samsonite Europe N.V.
entered into a Consulting Agreement (the "Consulting Agreement") with Mr. Van
Nevel agreeing to retain Mr. Van Nevel as a consultant to perform day-to-day
management of Samsonite Europe N.V. In January 1992, the Consulting Agreement
was amended to provide for an increase in the total annual salary and expenses
to be paid under the Consulting Agreement and the Management Agreement equal to
BF9,000,000, which, at the time, was approximately equal to $250,000. For
fiscal 1998, the Committee has approved a maximum achievable incentive bonus of
up to 200% of salary if certain Company-wide performance levels are achieved.
On February 20, 1996, Mr. Van Nevel was granted options under the Company's
1995 Stock Option and Incentive Award Plan to purchase 98,619 shares of the
Company's Common Stock at a price of $10.875 per share, the market price per
share of Common Stock at the date of grant. The options have a six-year term.
The options are exercisable 20% at the date of grant with the remaining options
becoming exercisable ratably over a four-year period from the date of the grant.
Effective as of May 15, 1996, the Company entered into an agreement with
Mr. Van Nevel that provides for a stock bonus of 38,889 shares of Common Stock
(the "Bonus Shares"), payable if Mr. Van Nevel remains continually employed by
the Company through the earlier of the third anniversary of the date of the
agreement and the first anniversary of a change of control event; provided that
if Mr. Van Nevel's employment is terminated prior to such date (i) due to death,
(ii) by the Company other
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than for "Cause or disability", as defined, or (iii) by the executive for
Good Reason, as defined, then notwithstanding such termination of employment,
such bonus shall be payable not later than 30 days following such termination,
and the Company will have the option of making such payment either in the form
of Bonus Shares or in cash in an amount equal to the market value of the Bonus
Shares at the time. The agreement also provides that if a change of control
event occurs, all options to purchase Common Stock previously granted to Mr.
Van Nevel shall vest on the first anniversary of the date on which such event
occurs (to the extent such options shall not have otherwise vested as of such
first anniversary date), so long as Mr. Van Nevel remains continually employed
by the Company through such first anniversary date.
Thomas R. Sandler. The Company has entered into an employment agreement
(the "Sandler Agreement"), with Mr. Sandler, effective as of May 1, 1995.
Pursuant to the Agreement, Mr. Sandler will serve as the Chief Financial Officer
of the Company for a five-year term expiring April 30, 2000. The Sandler
Agreement provides for an annual salary of $200,000, which may be increased (but
not decreased) by the Company at its discretion. Mr. Sandler is entitled to
receive an incentive bonus of up to 120% of his annual salary if the Company
attains certain performance goals. Up to 50% of this incentive bonus is payable
if Mr. Sandler satisfactorily completes certain annual projects prescribed by
the Board. For fiscal 1998, the Committee has approved a maximum achievable
incentive bonus of up to 200% of salary if certain Company-wide performance
levels are achieved. The Sandler Agreement provides for participation in all
Company pension, welfare, savings, and other benefit and insurance plans on the
same basis as other executive officers. The Sandler Agreement provides that if
the Company terminates Mr. Sandler's employment without Cause (as defined in the
Sandler Agreement), or if Mr. Sandler terminates his employment for Good Reason
(as defined in the agreement), then (1) the Company will be required to pay Mr.
Sandler an amount equal to the greater of (a) $400,000 or (b) the product of
$33,333 times the lesser of 18 or the number of months remaining in the term of
the Sandler Agreement and (2) until Mr. Sandler becomes eligible for coverage
under another employer's benefit plans, the Company will allow Mr. Sandler to
continue to participate, for the number of years remaining in the term of the
Sandler Agreement, in all Company benefit plans, provided such participation is
permissible under the general terms and provisions of those plans. The Sandler
Agreement provides that in the event the agreement continues in effect until the
end of its term, and the Company has not offered continued employment to Mr.
Sandler on substantially similar terms or the parties otherwise fail to reach a
mutual agreement for an extension of Mr. Sandler's employment, the Company will
be required to pay Mr. Sandler $200,000. The Sandler Agreement contains
customary provisions regarding reimbursement of legal fees and certain other
expenses, and indemnification with respect to actions taken by Mr. Sandler in
his capacity as an officer of the Company. The Sandler Agreement provides that
during Mr. Sandler's employment with the Company and for a period of one year
thereafter, Mr. Sandler will not, directly or indirectly, as a principal,
officer, director, employee or in any other capacity whatsoever, without the
prior written consent of the Company, engage in, or be or become interested or
acquire any ownership of any kind in, or become associated with, or make loans
or advance property to any person engaged in or about to engage in, any business
activity which is competitive with any of the businesses then engaged in by the
Company in any of the geographic areas in which such businesses have been
conducted by the Company during the last twelve months of his employment.
Making or holding any investment in any amount in securities traded on any
national securities exchange or traded in the over the counter market, provided
said investments do not exceed 1% of the issued and outstanding stock of any one
such corporation, will not constitute a violation of the foregoing
noncompetition agreement.
On February 20, 1996, Mr. Sandler was granted options under the Company's
1995 Stock Option and Incentive Award Plan to purchase 73,964 shares of the
Company's Common Stock at a price of $12.875 per share, a price above the market
value at the date of grant. The options have a six-year term. The options are
exercisable 20% at the date of grant with the remaining options becoming
exercisable ratably over a four-year period from the date of the grant. On
October 29, 1996, Mr. Sandler was granted options under the 1995 Plan to
purchase 24,655 shares of the Company's Common Stock at a price of $35.50 per
share, the market value at the date of grant. The options have a six-year term.
One third of the options are exercisable beginning January 31, 1997 with the
remaining options becoming exercisable ratably over a two-year period from
January 31, 1997. With respect to the October 29, 1996 grant of options, (i) if
a change in control event occurs, the options shall vest on the one-year
anniversary of the change in control event, provided that Mr. Sandler remains
employed through such date; and (ii) if Mr. Sandler's employment is terminated
by the Company without Cause or by Mr. Sandler for Good Reason, all unvested
options shall vest.
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Effective as of May 15, 1996, the Company entered into an agreement with
Mr. Sandler that provides for a stock bonus of 38,889 shares of Common Stock
(the "Bonus Shares"), payable if Mr. Sandler remains continually employed by the
Company through the earlier of the third anniversary of the date of the
agreement and the first anniversary of a change of control event; provided that
if Mr. Sandler's employment is terminated prior to such date (i) due to death,
(ii) by the Company other than for "Cause or disability", as defined, or (iii)
by the executive for Good Reason, as defined, then notwithstanding such
termination of employment, such bonus shall be payable not later than 30 days
following such termination, and the Company will have the option of making such
payment either in the form of Bonus Shares or in cash in an amount equal to the
market value of the Bonus Shares at the time. The agreement also provides that
if a change of control event occurs, all options to purchase Common Stock
granted to Mr. Sandler prior to May 15, 1996 shall vest on the first anniversary
of the date on which such event occurs (to the extent such options shall not
have otherwise vested as of such first anniversary date), so long as Mr. Sandler
remains continually employed by the Company through such first anniversary date.
Gary D. Ervick. The Company has entered into an employment agreement (the
"Ervick Agreement") with Mr. Ervick, effective as of September 10, 1996.
Pursuant to the Ervick Agreement, Mr. Ervick will serve as executive of the
Company for a three-year term expiring on September 9, 1999. The Ervick
Agreement provides for an annual salary of $212,000, which may be increased (but
not decreased) by the Company at its discretion. Mr. Ervick is eligible to
receive an incentive bonus of up to 90% of base annual salary, if the Company
attains certain performance goals. Up to 50% of this incentive bonus is payable
if Mr. Ervick satisfactorily completes certain annual projects prescribed by the
Board. For fiscal 1998, the Committee has approved a maximum achievable
incentive bonus of up to 150% of salary if certain Company-wide performance
levels are achieved. The Ervick Agreement provides for participation in all
Company pension, welfare, savings, and other benefit and insurance plans on the
same basis as other executive officers. The Ervick Agreement provides that if
the Company terminates Mr. Ervick's employment without Cause (as defined in the
Ervick Agreement), or if Mr. Ervick terminates his employment for Good Reason
(as defined in the agreement), then (i) the Company will be required to pay Mr.
Ervick an amount equal to 200% of his annual base salary plus a pro-rata portion
of any incentive bonus which would have been payable for that portion of the
fiscal year preceding the date of termination; and (ii) the Company will allow
Mr. Ervick to continue to participate, for a period not to exceed six months, in
all Company benefit plans to the same extent and upon the same terms as Mr.
Ervick participated in such plans immediately prior to the termination of his
employment, provided such participation is permissible under the general terms
and provisions of those plans. The Ervick Agreement provides that in the event
the agreement continues in effect until the end of its term, and the Company has
not offered continued employment to Mr. Ervick on substantially similar terms or
the parties otherwise fail to reach a mutual agreement for an extension of Mr.
Ervick's employment, the Company will be required to pay Mr. Ervick a sum equal
to 200% of his annual base salary. The Ervick Agreement contains customary
provisions regarding reimbursement of legal fees and certain other expenses, and
indemnification with respect to actions taken by Mr. Ervick in his capacity as
an officer of the Company. The Ervick Agreement provides that during Mr.
Ervick's employment with the Company and for a period of one year thereafter,
Mr. Ervick will not, directly or indirectly, as a principal, officer, director,
employee or in any other capacity whatsoever, without the prior written consent
of the Company, engage in, or be or become interested or acquire any ownership
of any kind in, or become associated with, or make loans or advance property to
any person engaged in or about to engage in, any business activity that is in
substantial competition, as defined by the Ervick Agreement, with any of the
businesses then engaged in by the Company in any of the geographic areas in
which such businesses have been conducted by the Company during the last twelve
months of his employment. Making or holding any investment in any amount in
securities traded on any national securities exchange or traded in the over-the-
counter market, provided said investments do not exceed 1% of the issued and
outstanding stock of any one such corporation, will not constitute a violation
of the foregoing noncompetition agreement.
On March 28, 1996, Mr. Ervick was granted options under the Company's 1995
Stock Option and Incentive Award Plan (the "1995 Plan") to purchase 12,895
shares of the Company's Common Stock at a price of $10.875 per share, the market
price per share of Common Stock at the date of grant. The options have a six-
year term. The options are exercisable 20% at the date of grant with the
remaining options becoming exercisable ratably over a four-year period from the
date of the grant. On August 21, 1996, Mr. Ervick was granted options under the
1995 Plan to purchase 40,000 shares of the Company's Common Stock at a price of
$18.50 per share, the market value at the date of grant. The options have a
six-year term with one third becoming exercisable on January 31, 1997 and the
remaining options becoming exercisable ratably over a two-year period beginning
January 31, 1997. On January 16, 1997, Mr. Ervick was granted options under the
1995 Plan to purchase 30,000 shares of the
-42-
<PAGE>
Company's Common Stock at a price of $41.50 per share, the market value at
the date of grant. The options have a six-year term and become exercisable
ratably in thirds over a three-year period beginning on the date of the grant.
For the options granted in August 21, 1996 and January 16, 1997, (i) if a change
in control event occurs, the options shall vest on the one year anniversary of
the change in control event, provided that Mr. Ervick remains employed through
such dates; and (ii) if Mr. Ervick's employment is terminated by the Company
without Cause or by Mr. Ervick for Good Reason, all unvested options shall vest.
1995 STOCK OPTION AND INCENTIVE AWARD PLAN
In fiscal 1997, the Company increased the number of shares reserved for
issuance under the 1995 Stock Option and Award Plan (as Amended in 1996) ("the
1995 Plan") to 2,550,000 shares for the issuance of options as determined by the
Compensation Committee of the Board of Directors. The 1995 Plan provides for
the issuance of a variety of awards, including tax qualified incentive stock
options, nonqualified stock options, stock appreciation rights, restricted stock
awards or other forms of awards consistent with the purposes of the plan.
Incentive stock options must be issued at exercise prices no less than the fair
market value of the Common Stock at the date of the grant. Nonqualified options
may be granted at exercise prices at or below the market value, but not at less
than 50% of the market value of the Common Stock at the date of the grant.
Options granted under the 1995 Plan will vest over a period of not more than ten
years as determined by the Compensation Committee.
At January 31, 1997, options for 2,299,872 shares were outstanding to
various executive officers and other employees under the 1995 Plan at option
exercise prices ranging from $10.875 to $42.75 per share, which prices were
greater than or equal to the market value of the Common Stock as of the date of
grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No current or former officer of the Company served as a member of the
Compensation Committee.
PERFORMANCE GRAPH
The performance graph below compares the cumulative total return to
stockholders on June 24, 1994, the date on which the Common Stock was first
traded publicly through January 31, 1997, for a holder of Common Stock against
the cumulative total return of the Standard & Poor's Midcap 400 Index ("S&P
Midcap 400") and a group of peer companies over the same period. However, in
reviewing this graph, stockholders should keep in mind the possible effect that
the limited trading in the Common Stock may have on the price of such stock and
the fact that, in the Company's judgment, there are no directly comparable
companies which are publicly traded. The decline in the value of the Company's
Common Stock in fiscal 1996 can be partially attributed to the spinoff of
Culligan Water Technologies, Inc. on September 12, 1995. The stock price
performance depicted in the performance graph is not necessarily indicative of
future stock price performance.
The performance graph assumes $100 was invested on June 24, 1994 and is
based on an opening price for the Common Stock of $20.25 per share on June 24,
1994 and closing prices for the S&P Midcap 400 and the common stock of the
members of the industry peer group on June 23, 1994. The cumulative total
stockholder return is based on share price appreciation plus dividends. The
performance data is presented in the graph and in the table which follows the
graph.
-43-
<PAGE>
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
June 24, 1994 January 31, 1995 January 31, 1996 January 31, 1997
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Samsonite $100 $116 $ 46 $195
- -------------------------------------------------------------------------------------
S&P Midcap 400 $100 $105 $137 $168
- -------------------------------------------------------------------------------------
Peer Group $100 $116 $115 $136
- -------------------------------------------------------------------------------------
</TABLE>
The peer group consists of the following publicly-held branded consumer
durables manufacturers: The Coleman Company, Inc., Sunbeam Corporation, The
Black & Decker Corporation, Premark International Inc., Rubbermaid Incorporated
and Toastmaster Inc.
-44-
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information about persons known to
the Company to be the beneficial owner of more that 5% of the Common Stock, and
as to the beneficial ownership of the Common Stock by each of the Company's
directors and executive officers and all of the Company's directors and
executive officers as a group, as of March 31, 1997. Except as otherwise
indicated, to the knowledge of the Company, the persons identified below have
sole voting and sole investment power with respect to shares they own of record.
<TABLE>
<CAPTION>
Number of Shares
Name and Address of Beneficial Owner Beneficially Owned Percent
- ------------------------------------ ------------------ -------
<S> <C> <C>
Apollo Investment Fund, L.P.
c/o Apollo Advisors, L.P.
2 Manhattan Road
Purchase, New York 10577
and
Lion Advisors, L.P. 7,334,859 (1) 36.08%
1301 Avenue of the Americas, 38th Floor
New York, NY 10019
FMR Corp. 2,540,000 12.50%
82 Devonshire Street
Boston, MA 02109
Leon G. Cooperman 1,028,412 (2) 5.06%
c/o Omega Advisors, Inc.
Wall Street Plaza, 31st Floor
88 Pine Street
New York, New York 10005
Richard R. Nicolosi 406,375 (3) 2.00%
c/o Samsonite Corporation
11200 East 45th Avenue
Denver, Colorado 80239
Mark H. Rachesky 75,184 *
Mark Capital Partners
335 Madison Avenue, 26th Floor
New York, New York 10017
John P. Murtagh 71,000 (4) *
c/o Samsonite Corporation
11200 East 45th Avenue
Denver, Colorado 80239
</TABLE>
-45-
<PAGE>
<TABLE>
<CAPTION>
Number of Shares
Name and Address of Beneficial Owner Beneficially Owned Percent
- ------------------------------------ ------------------ -------
<S> <C> <C>
Luc Van Nevel 41,448 (5) *
c/o Samsonite Europe N.V.
Westerring 17
B-9700 Oudenaarde, Belgium
Thomas J. Leonard 40,163 (5) *
c/o Samsonite Corporation
11200 East 45th Avenue
Denver, Colorado 80239
Thomas R. Sandler 39,304 (6) *
c/o Samsonite Corporation
11200 East 45th Avenue
Denver, Colorado 80239
Robert P. Baird, Jr. 38,833 (7) *
c/o Samsonite Corporation
11200 East 45th Avenue
Denver, Colorado 80239
James E. Barch 38,333 (7) *
c/o Samsonite Corporation
11200 East 45th Avenue
Denver, Colorado 80239
Karlheinz Tretter 33,446 (8) *
c/o Samsonite Europe N.V.
Westerring 17
B-9700 Oudenaarde, Belgium
Gary D. Ervick 23,771 (9) *
c/o Samsonite Corporation
11200 East 45th Avenue
Denver, Colorado 80239
D. Michael Clayton 4,031 (10) *
c/o Samsonite Corporation
11200 East 45th Avenue
Denver, Colorado 80239
Bernard Attal 298 *
1301 Sixth Avenue, 38th Floor
New York, New York 10019
R. Theodore Ammon 184 *
Big Flower Press Holdings, Inc.
3 E. 54th Street, 19th Floor
New York, New York 10022
</TABLE>
-46-
<PAGE>
<TABLE>
<CAPTION>
Number of Shares
Name and Address of Beneficial Owner Beneficially Owned Percent
- ------------------------------------ ------------------ -------
<S> <C> <C>
Leon D. Black 184 (11) *
1301 Avenue of the Americas, 38th Floor
New York, NY 10019
Robert H. Falk 184 (11) *
1301 Avenue of the Americas, 38th Floor
New York, NY 10019
Robert L. Rosen 184 *
RLR Partners, L.P.
825 Third Avenue, 40th Floor
New York, New York 10022
Marc J. Rowan 184 (11) *
1301 Avenue of the Americas, 38th Floor
New York, NY 10019
Stephen J. Solarz 135 *
APCO Associates, Inc.
1615 L Street, N.W., Suite 900
Washington, DC 20036
All Directors and Executive Officers as a group 813,241 (12) 3.93%
</TABLE>
*Less than 1.0%
(1) Includes 3,668,163 shares held by Apollo Investment Fund, L.P. ("Apollo")
and 3,666,696 shares beneficially held by Lion Advisors, L.P. ("Lion") on
behalf of an investment account under management over which Lion has
exclusive investment, voting and dispositive power. Lion is affiliated
with Apollo Advisors, L.P., the general partner of Apollo Investments.
(2) Includes shares purchased by Omega Capital Partners (317,712 shares),
Omega Institutional Partners, L.P. (21,100 shares), Omega Overseas
Partners Ltd. (453,700 shares), Omega Equity Partners, L.P. (25,600
shares) and Omega Advisors, Inc. (210,300 shares), each of which entities
is controlled by Mr. Cooperman.
(3) Includes 60,000 shares of restricted Common Stock issued to Mr. Nicolosi
in connection with his employment arrangement. Includes options to
purchase 93,085 shares of Common Stock exercisable within 60 days of March
31, 1997.
(4) Includes options to purchase 50,000 shares of Common Stock exercisable as
of March 31, 1997.
(5) Includes options to purchase 39,448 shares of Common Stock exercisable as
of March 31, 1997.
(6) Includes options to purchase 37,804 shares of Common Stock exercisable as
of March 31, 1997.
(7) Includes options to purchase 33,333 shares of Common Stock exercisable as
of March 31, 1997.
(8) Includes options to purchase 32,446 shares of Common Stock exercisable as
of March 31, 1997.
-47-
<PAGE>
(9) Includes options to purchase 18,491 shares of Common Stock exercisable as
of March 31, 1997.
(10) Includes options to purchase 3,831 shares of Common Stock exercisable as
of March 31, 1997.
(11) Includes shares issued under the Directors Stock Plan. Does not include
shares held by Apollo or Lion. Each of Messrs. Falk and Rowan, directors
of the Company, together with Mr. Black, a director of the Company, who
is also a director of Apollo Capital Management, Inc., the general
partner of Apollo Advisors, L.P., and of Lion Capital Management, Inc.,
the general partner of Lion, disclaims beneficial ownership of the
securities held by Apollo and Lion.
(12) Excludes shares listed above for Apollo Investment Fund, L.P., and Lion
Advisors, L.P. If such shares were included, the aggregate number of
shares beneficially owned by all directors and executive officers as a
group would be 8,148,100, representing 39.35%.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As described in note 13 to the consolidated financial statements included
elsewhere herein, the Company settled for $200,000 a claim against the Company
by Apollo Investment Fund, L.P. ("Apollo") and an affiliate of Apollo. Apollo
and its affiliates own 36.08% of the Company's issued and outstanding common
stock as of March 31, 1997 (45.75% at January 31, 1997).
-48-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements:
See Index to Consolidated Financial Statements and Schedule on page F-1
hereof.
2. Financial Statement Schedule:
See Index to Consolidated Financial Statements and Schedule on page F-1
hereof.
3. Exhibits:
See Exhibit Index on pages E-1 through E-3 hereof.
(b) Reports on Form 8-K.
Form 8-K dated November 8, 1996.
Item 5. Other Events - Restructuring Program.
-49-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SAMSONITE CORPORATION
By: /s/ RICHARD R. NICOLOSI
----------------------------------
President, Chief Executive Officer
and Director
Date: April 10, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ RICHARD R. NICOLOSI President, Chief Executive Officer April 10, 1997
- -----------------------
Richard R. Nicolosi and Director
/s/ THOMAS R. SANDLER Chief Financial Officer and Treasurer April 10, 1997
- -----------------------
Thomas R. Sandler
/s/ R. THEODORE AMMON Director April 10, 1997
- -----------------------
R. Theodore Ammon
/s/ BERNARD ATTAL Director April 10, 1997
- -----------------------
Bernard Attal
/s/ LEON D. BLACK Director April 10, 1997
- -----------------------
Leon D. Black
/s/ ROBERT H. FALK Director April 10, 1997
- -----------------------
Robert H. Falk
/s/ MARK H. RACHESKY Director April 10, 1997
- -----------------------
Mark H. Rachesky
/s/ ROBERT L. ROSEN Director April 10, 1997
- -----------------------
Robert L. Rosen
/s/ MARC J. ROWAN Director April 10, 1997
- -----------------------
Marc J. Rowan
/s/ STEPHEN J. SOLARZ Director April 10, 1997
- -----------------------
Stephen J. Solarz
</TABLE>
-50-
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
<TABLE>
<CAPTION>
CONSOLIDATED FINANCIAL STATEMENTS Page
----
<S> <C>
Independent Auditors' Report.............................................. F-2
Consolidated Balance Sheets as of January 31, 1997 and 1996............... F-3
Consolidated Statements of Operations for each of the years in the
three-year period ended January 31, 1997................................. F-4
Consolidated Statements of Stockholders' Equity for each of the years in
the three-year period ended January 31, 1997............................. F-5
Consolidated Statements of Cash Flows for each of the years in the
three-year period ended January 31, 1997................................. F-6
Notes to Consolidated Financial Statements................................ F-8
SCHEDULE:
Schedule II - Valuation and Qualifying Accounts........................... F-34
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Samsonite Corporation:
We have audited the accompanying consolidated financial statements of
Samsonite Corporation (formerly Astrum International Corp.) and subsidiaries as
listed in the accompanying index. In connection with our audits of the
consolidated financial statements, we also have audited the financial statement
schedule as listed in the accompanying index. These consolidated financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Samsonite Corporation and subsidiaries as of January 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended January 31, 1997, in conformity with generally accepted
accounting principles. Also in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
KPMG Peat Marwick LLP
Denver, Colorado
March 18, 1997
F-2
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
January 31, 1997 and 1996
(In thousands)
<TABLE>
<CAPTION>
Pro Forma* January 31,
January 31, -----------------------
ASSETS 1997 1997 1996
------ ---------- ------------ --------
<S> <C> <C> <C>
Current assets: (Unaudited)
Cash and cash equivalents $ 9,343 9,343 15,179
Trade receivables, net of allowances for doubtful accounts
of $7,431 and $8,152 83,276 83,276 73,513
Notes and other receivables 9,045 9,045 3,711
Inventories (note 4) 135,071 135,071 115,736
Deferred income tax assets (note 10) 36,365 36,365 38,760
Prepaid expenses and other current assets 13,012 13,012 15,990
Assets held for sale 9,002 9,002 9,455
-------- -------- --------
Total current assets 295,114 295,114 272,344
Investments in affiliates 2,989 2,989 --
Property, plant and equipment, net (note 5) 143,959 143,959 140,912
Intangible assets, less accumulated amortization of 127,655 127,655 159,492
$203,039 and $171,278 (note 6)
Other assets and long-term receivables, net of allowances for doubtful accounts
of $5,556 and $10,104 (note 11) 20,146 22,941 34,695
--------- -------- --------
$ 589,863 592,658 607,443
========= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Short-term debt (notes 7 and 8) $ 2,095 2,095 9,487
Current installments of long-term obligations (note 8) 12,862 22,862 16,306
Accounts payable 46,777 46,777 33,520
Accrued interest expense 1,383 2,183 1,742
Accrued compensation and employee benefits 21,540 21,540 19,619
Other accrued expenses (note 13) 81,070 94,262 92,151
--------- -------- --------
Total current liabilities 165,727 189,719 172,825
Long-term obligations, less current installments (note 8) 150,255 267,755 294,653
Deferred income tax liabilities (note 10) 26,208 30,921 33,038
Other noncurrent liabilities (notes 11 and 13) 75,125 75,125 79,672
--------- -------- --------
Total liabilities 417,315 563,520 580,188
--------- -------- --------
Minority interests in consolidated subsidiaries 4,140 4,140 2,139
Stockholders' equity (notes 8, 9 and 17):
Preferred stock -- -- --
Common stock 203 160 159
Additional paid-in capital 416,901 266,752 261,842
Accumulated deficit (242,652) (235,870) (224,547)
Foreign currency translation adjustment (5,337) (5,337) (2,338)
Unearned compensation - restricted shares (707) (707) --
Note receivable from officer -- -- (10,000)
--------- -------- --------
Total stockholders' equity 168,408 24,998 25,116
--------- -------- --------
Commitments and contingencies (notes 8, 9, 11 and 13)
$ 589,863 592,658 607,443
========= ======== ========
</TABLE>
*The unaudited pro forma consolidated balance sheet gives effect to a stock
offering completed February 11, 1997, the exercise of stock options in
connection with the offering, and the use of proceeds therefrom. See note 17.
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year ended January 31,
-----------------------------
<S> <C> <C> <C>
1997 1996 1995
---- ---- ----
Net sales $741,138 675,209 635,452
Cost of goods sold 449,333 414,691 373,967
-------- -------- --------
Gross profit 291,805 260,518 261,485
Selling, general and administrative expenses 233,761 203,701 197,716
Amortization of intangible assets 31,837 63,824 67,189
Provision for restructuring operations (note 3) 10,670 2,369 --
-------- -------- --------
Operating income (loss) 15,537 (9,376) (3,420)
Other income (expense):
Interest income 1,419 4,709 2,909
Interest expense and amortization of premium and issue costs of debt (35,670) (39,974) (37,875)
Other - net (notes 13 and 14) 18,821 3,967 2,729
-------- -------- --------
Income (loss) from continuing operations before income taxes, minority
interest, and extraordinary item 107 (40,674) (35,657)
Income tax expense (note 10) (10,389) (9,095) (10,619)
Minority interest in earnings of subsidiaries (1,041) (1,385) (931)
-------- -------- --------
Loss from continuing operations before extraordinary item (11,323) (51,154) (47,207)
Operations discontinued and sold (note 2):
Loss on operations, after income tax expense
of $12,416 -- -- (43,910)
Loss on discontinuance - net, after income tax expense
(benefit) of $1,062 and ($12,457) -- (2,251) (20,462)
-------- -------- --------
Loss before extraordinary item (11,323) (53,405) (111,579)
Extraordinary item - loss on extinguishment of debt,
net of income tax benefit of $5,589 (note 8) -- (8,042) --
-------- -------- --------
Net loss $(11,323) (61,447) (111,579)
======== ======== ========
Loss per share:
Continuing operations before extraordinary item $(.71) (3.24) (3.05)
Operations discontinued and sold -- (.14) (4.17)
Extraordinary item -- (.51) --
-------- ------- --------
Net loss per share $(.71) (3.89) (7.22)
======== ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
(In thousands, except share amounts)
<TABLE>
<CAPTION>
Foreign Unearned Note
Additional Accumu- currency compensation- receivable
Preferred Common paid-in lated translation restricted from
stock(1) stock(2) capital deficit adjustment shares officer
--------- -------- ---------- ------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, February 1, 1994 $ -- 155 312,989 (51,521) (7,930) -- --
Net loss -- -- -- (111,579) -- -- --
Transfer Culligan foreign currency
adjustment to discontinued
operations -- -- -- -- 1,345 -- --
Foreign currency translation
adjustment -- -- -- -- 5,013 -- --
--------- -------- -------- ------- -------- ------- -------
Balance, January 31, 1995 -- 155 312,989 (163,100) (1,572) -- --
Net loss -- -- -- (61,447) -- -- --
Issuance of 425,532 shares to officer in
exchange for note receivable (note 9) -- 4 9,996 -- -- -- (10,000)
Spinoff of water treatment business
(note 2) -- -- (61,143) -- -- -- --
Foreign currency translation
adjustment -- -- -- -- (766) -- --
--------- -------- -------- ------- -------- ------- -------
Balance, January 31, 1996 -- 159 261,842 (224,547) (2,338) -- (10,000)
Net loss -- -- -- (11,323) -- -- --
Issuance of 55,000 shares of common
stock to an officer for cash (note 9) -- -- 1,004 -- -- -- --
Stock award of 60,000 shares of
restricted common stock to an
officer (note 9) -- 1 1,094 -- -- (1,095) --
Issuance of 513 shares to directors
for services (note 9) -- -- 19 -- -- -- --
Amortization of restricted stock award
to compensation expense -- -- -- -- -- 388 --
Compensation expense accrued for
stock bonus awards (note 9) -- -- 503 -- -- -- --
Exercise of employee stock options
and related income tax benefits (note 9) -- -- 591 -- -- -- --
Reclassification of accrued
compensation for stock options
exercised (note 9) -- -- 1,699 -- -- -- --
Foreign currency translation
adjustment -- -- -- -- (2,999) -- --
Payment of note receivable (note 9) -- -- -- -- -- -- 10,000
--------- -------- -------- ------- -------- ------- -------
Balance, January 31, 1997 $ -- 160 266,752 (235,870) (5,337) (707) --
========= ======== ======== ======= ======== ======= =======
</TABLE>
(1) $.01 par value; 2,000,000 shares authorized; no shares issued and
outstanding at January 31, 1997 or 1996.
(2) $.01 par value; 60,000,000 shares authorized; 16,033,833 and 15,889,450
shares issued and outstanding at January 31, 1997 and 1996, respectively.
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Year ended January 31,
------------------------------
<S> <C> <C> <C>
1997 1996 1995
---- ---- ----
Cash flows from operating activities:
Net loss $(11,323) (61,447) (111,579)
Adjustments to reconcile net loss to net cash provided by continuing
operating activities:
Nonoperating income/expense items:
Loss from extinguishment of debt -- 8,042 --
Loss from operations discontinued and sold -- 2,251 64,372
Loss on disposition of fixed assets 62 245 880
Gain on sale of other asset -- (5,368) --
Depreciation and amortization of property and equipment 22,052 20,277 18,297
Amortization of debt issue costs and premium 1,932 803 (692)
Amortization of intangible assets 31,837 63,824 67,189
Amortization of stock awards and stock issued for services 910 -- --
Deferred income tax expense 1,365 2,809 1,946
Adjustment of liability for PBGC claims (11,100) -- --
Provision for doubtful accounts 2,815 2,627 1,198
Provision for restructuring operations 10,670 2,369 --
Changes in operating assets and liabilities:
Trade and other receivables (17,850) 3,544 (11,877)
Inventories (19,335) (6,404) (6,017)
Other current assets 3,431 (620) (4,978)
Accounts payable and accrued liabilities 9,027 (11,114) 10,471
Other adjustments - net 853 (2,170) 9,342
-------- ------- -------
Net cash provided by continuing operating activities before reorganization items 25,346 19,668 38,552
Operating cash flows used for reorganization items:
Professional fees paid for services -- -- (2,714)
Other reorganization items -- -- (1,861)
-------- ------- -------
Net cash provided by operating activities 25,346 19,668 33,977
-------- ------- -------
Cash flows provided by (used in) investing activities:
Proceeds from sales of fixed assets and other asset 2,323 15,086 1,342
Purchases of property, plant and equipment:
By Company and wholly-owned subsidiaries (25,465) (19,668) (17,390)
By less than 100% owned subsidiaries (5,628) (2,000) (573)
Release of cash related to restricted insurance assets -- -- 10,799
Royalty payments received -- -- 70,719
Cash received from spinoff or sale of operations discontinued -- 112,000 96,436
Net cash received from (used in) operations discontinued and sold 10,446 10,483 (9,149)
Acquisition of Mexico subsidiary, net of cash acquired of $1,469 -- 1,275 --
Other 1,307 (280) --
-------- ------- -------
Net cash provided by (used in) investing activities $(17,017) 116,896 152,184
-------- ------- -------
</TABLE>
(continued)
F-6
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows -- (Continued)
(In thousands)
<TABLE>
<CAPTION>
Year ended January 31,
-----------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows used in financing activities:
Net borrowings (payments) of senior credit facility $ (8,000) 58,000 (25,659)
Proceeds from issuance of senior secured notes -- 190,000 --
Issuance costs for senior notes and credit facility -- (13,472) --
Repurchase of senior secured notes -- (375,217) (126,442)
Redemption premium on senior secured notes -- (18,000) --
Proceeds from long-term obligations - other 26,206 19,910 659
Payments of long-term obligations - other (35,901) (15,201) (9,183)
Proceeds from (payments of) short-term debt - net (7,231) (14,022) 4,030
Proceeds from sale of common stock and exercise of stock options 1,327 -- --
Payment of note receivable from officer 10,000 -- --
Other, net 1,907 (1,384) --
-------- ------- -------
Net cash used in financing activities (11,692) (169,386) (156,595)
-------- ------- -------
Effect of exchange rate changes on cash and cash equivalents (2,473) (1,813) 737
-------- ------- -------
Net increase (decrease) in cash and cash equivalents (5,836) (34,635) 30,303
Cash and cash equivalents, beginning of year 15,179 49,814 19,511
-------- ------- -------
Cash and cash equivalents, end of year $ 9,343 15,179 49,814
======== ======= =======
Supplemental disclosures of cash flow information:
Cash paid during the year for interest $ 33,194 46,755 69,961
======== ======= =======
Cash paid during the year for income taxes, net $ 3,210 5,315 19,993
======== ======= =======
Noncash Transactions:
During the years ended January 31, 1997, 1996, and 1995 property
and equipment was acquired under capital lease financing
transactions of $1,281,000, $2,307,000, and $490,000, respectively.
Other noncash transactions are described in notes 2, 9, 13, and 14.
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) General Business
Samsonite Corporation and subsidiaries (the "Company") was formerly known
as Astrum International Corp. ("Astrum"). On July 14, 1995, Astrum merged
with its wholly-owned subsidiary, Samsonite Corporation, and changed its
name to Samsonite Corporation. The Company is engaged in the manufacture
and sale of luggage and related products throughout the world, primarily
under the Samsonite, American Tourister, and Lark brand names (see note
16). The principal customers of the Company are department/specialty retail
stores, mass merchants, catalog showrooms, and warehouse clubs. The Company
also sells its luggage and other travel-related products through its
Company-owned stores.
Previously, Astrum was a holding company with subsidiaries involved in the
water treatment business and apparel manufacturing business in addition to
the luggage business. As more fully explained in note 2, the Company has
discontinued the water treatment and apparel manufacturing business
segments.
(b) Basis of Presentation
On May 25, 1993, the United States Bankruptcy Court for the Southern
District of New York confirmed the Amended Plan of Reorganization (the
"Plan") for Astrum. Pursuant to the terms of the Plan, which became
effective on June 8, 1993 (the "Effective Date"), Astrum completed a
comprehensive financial reorganization which reduced debt and annual
interest expense (the "Restructuring").
The Restructuring has been accounted for pursuant to the American Institute
of Certified Public Accountants Statement of Position 90-7, entitled
"Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code" ("SOP 90-7"). SOP 90-7 requires that assets and liabilities be
adjusted to their fair values ("fresh-start" values) and that a new
reporting entity be created. On June 30, 1993, for accounting purposes, the
Plan was consummated and SOP 90-7 was adopted. The accompanying
consolidated financial statements include the ongoing impact of the fresh-
start reporting, the most significant of which included the recording of
Reorganization Value in Excess of Identifiable Assets. Reorganization
Value in Excess of Identifiable Assets was amortized over a three-year
period ending in June 1996 (see note 6).
(c) Principles of Consolidation
The consolidated financial statements include the financial statements of
Samsonite Corporation and its subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation. The
Company's primary foreign subsidiaries have December 31 year ends.
Minority interests consist of other stockholders' ownership interests in
subsidiaries of the Company.
(d) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ significantly from
those estimates.
F-8
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(e) Cash Equivalents
The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.
(f) Inventories
The Company values inventories at the lower of cost on the first-in, first-
out ("FIFO") method or market.
(g) Investments in Affiliates
At January 31, 1997, investments in affiliates primarily represents the
Company's investment in Chia Tai Samsonite (H.K.) Ltd., a 50% owned joint
venture formed to manufacture and distribute luggage in China. This
investment is accounted for using the equity method of accounting.
(h) Property, Plant and Equipment
Property, plant and equipment acquired subsequent to the adoption of fresh-
start reporting are stated at cost. In connection with the adoption of
fresh-start reporting at June 30, 1993, the Company was required to adjust
property, plant and equipment to fair value. Assets under capital leases
are stated at the present value of the future minimum lease payments.
Improvements which extend the life of an asset are capitalized. Maintenance
and repair costs are expensed as incurred.
Assets held for sale are assets not used in the manufacturing or
distribution operations which management believes will be sold within one
year. The assets are recorded at the lower of cost or net realizable value
(fair value less costs to sell).
Depreciation and amortization are provided on the straight-line method over
the estimated useful lives of the assets as follows:
Buildings.........................................20 to 65 years
Machinery, equipment and other.....................2 to 20 years
(i) Intangible Assets
As a result of adopting fresh-start reporting in 1993, the Company recorded
Reorganization Value in Excess of Identifiable Assets which became fully
amortized in June of 1996. Tradenames, licenses, patents and other
intangibles were recorded at fair value based upon independent appraisals.
These assets are amortized on a straight-line basis over their estimated
useful lives which are primarily as follows:
Tradenames..............................................40 years
Licenses, patents and other....................... 1 to 23 years
The Company accounts for these intangible assets at the lower of amortized
cost or fair value. On an ongoing basis, the Company reviews the valuation
and amortization of intangible assets, taking into consideration any events
or circumstances which may have diminished the recorded value.
F-9
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(j) Debt Issuance Costs
Costs incurred in connection with the issuance of new debt instruments are
deferred and included in other assets. Such costs are amortized over the
term of the related debt obligation.
(k) Per Share Data
Loss from continuing operations before extraordinary item per share and net
loss per share are computed based on a weighted average number of shares of
common stock outstanding during the period. The weighted average number of
common shares outstanding was 15,971,157, 15,806,675 and 15,463,918 for the
years ended January 31, 1997, 1996 and 1995, respectively. Common stock
equivalents are not included in the computation as they are antidilutive.
(l) Income Taxes
The Company accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes ("SFAS 109"). SFAS 109 requires recognition of deferred tax assets
and liabilities for operating loss and tax credit carryforwards and the
estimated future tax consequences attributable to temporary differences
between the financial statement carrying amount of existing assets and
liabilities and their respective tax bases. Measurement of deferred tax
assets and liabilities is based upon enacted tax rates expected to apply to
taxable income in the years in which carryforwards and temporary
differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
Deferred tax assets are reduced by a valuation allowance for the portion of
such assets for which it is more likely than not the amount will not be
realized. Deferred tax assets and liabilities are classified as current or
noncurrent based on the classification of the underlying asset or liability
giving rise to the temporary difference or the expected date of utilization
of carryforwards.
(m) Insurance
The Company maintains self-insurance programs for certain workers'
compensation and automobile liability risks up to $500,000 per individual
claim. The Company purchases excess workers' compensation and automobile
liability coverage for individual claims in excess of $500,000.
(n) Foreign Exchange Risk and Financial Instruments
The accounts of the Company's foreign subsidiaries and affiliates are
measured using the local currency as the functional currency. For those
operations, assets and liabilities are translated into U.S. dollars at
period-end exchange rates. Income and expense accounts are translated at
average monthly exchange rates. Net exchange gains or losses resulting from
such translation are excluded from results of operations and accumulated as
a separate component of stockholders' equity. Gains and losses from foreign
currency transactions are included in other income (expense).
The Company enters into foreign exchange contracts in order to reduce its
economic exposure to fluctuations in currency exchange rates on certain
foreign operations and royalty agreements through the use of forward
delivery commitments. Generally, open forward delivery commitments are
marked to market at the end of each accounting period and corresponding
gains and losses are recognized in other income (expense).
F-10
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
With respect to trade receivables, concentration of credit risk is limited
due to the diversity in the Company's customer base and geographic areas
covered by the Company's operations. In certain European countries, the
Company receives negotiable trade acceptances as payment for goods with
maturities from 60 to 90 days from the date of issuance. These instruments
are generally discounted to banks with recourse. At January 31, 1997,
approximately $17,497,000 of such instruments had been discounted and, by
the terms of their maturity dates, were uncollected by the holders. Any
probable bad debt losses for trade receivables or acceptances have been
reserved for in the allowance for doubtful accounts.
(o) Accounting for Long-lived Assets
The Company accounts for long-lived assets in accordance with the
provisions of Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of ("SFAS 121"). SFAS 121 requires impairment losses
to be recorded on long-lived assets and certain identifiable intangibles
used in operations when indicators of impairment are present and the
undiscounted future cash flows (without interest charges) estimated to be
generated by those assets are less than the assets' carrying amount.
Impairment is measured by the excess of the assets' carrying amount over
fair value. SFAS 121 also requires that long-lived assets and certain
identifiable intangibles that are expected to be disposed of be reported at
the lower of the carrying amount or fair value less costs to sell. The
Company adopted SFAS 121 in the first quarter of fiscal 1997; however, no
impairment losses were recorded as a result.
(p) Royalty Revenues
The Company licenses its brand names to certain unrelated third parties as
well as certain foreign subsidiaries and joint ventures. Net sales include
royalties earned of $20,548,000, $17,056,000, and $18,351,000 for the years
ended January 31, 1997, 1996, and 1995, respectively. Royalty revenues in
fiscal 1997 include approximately $3,900,000 from the sale of apparel
tradename licenses in certain foreign countries.
(q) Reclassifications
Certain reclassifications were made to the consolidated financial
statements for prior periods to conform to the January 31, 1997
presentation.
The Company receives negotiable drafts as payment for goods in certain
foreign countries and discounts such instruments to banks with recourse.
The proceeds from such discounted drafts were accounted for as loans until
fiscal 1997 when the Company began classifying these transactions as a
reduction of other receivables. Accordingly, a reclassification of
approximately $14,000,000 has been made as of January 31, 1996 to reduce
notes and other receivables and short-term debt to conform to the January
31, 1997 presentation. This change in classification has no effect on the
consolidated statements of operations for any fiscal period presented.
(2) OPERATIONS DISCONTINUED AND SOLD
During fiscal 1995, the Company's Board of Directors adopted a plan to (i)
separate the water treatment business from its other operations through a
spinoff in the form of a one-for-one stock dividend to the Company's
stockholders and (ii) to sell or otherwise discontinue its apparel
manufacturing and pet food businesses. The results of these operations
through January 31, 1995 are presented in the accompanying consolidated
financial statements as discontinued operations. The loss on discontinuance
for fiscal 1995 includes the sales of certain assets from discontinued
operations, the adjustment of certain assets and liabilities to their
estimated net realizable value, and the estimate
F-11
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
of certain operating results through the date of disposal. The loss on
discontinuance during fiscal 1996 includes an adjustment to reduce
previously accrued losses on disposal of $2.6 million, net of income taxes
of $1.1 million, and a provision for federal income taxes on the
distribution of the common stock of the water treatment business to certain
foreign stockholders of $3.8 million.
The accompanying consolidated financial statements present the results of
the water treatment business, the apparel manufacturing business and the
pet food business as discontinued operations. The operating results of the
discontinued operations for the year ended January 31, 1995 are summarized
below (in thousands):
Water treatment:
Revenues $280,041
========
Loss before income taxes $(28,288)
========
Apparel manufacturing:
Revenues $225,708
========
Loss before income taxes $ (2,207)
========
Pet food:
Revenues $ 4,741
========
Loss before income taxes $ (999)
========
During fiscal 1996, the Company distributed its stock in the water
treatment business to the Company's stockholders and charged the amount of
the net assets of the water treatment business of $61.1 million at the date
of distribution to additional paid-in capital. As part of the spinoff, the
water treatment business repaid $112 million of intercompany indebtedness.
Additionally, the Company closed its apparel manufacturing operations and
sold all related inventories and equipment to unrelated third parties. The
pet food segment was sold in fiscal 1995.
(3) PROVISION FOR RESTRUCTURING OPERATIONS
Fiscal 1997
-----------
The Company recorded a restructuring provision of $10,670,000 in the
third quarter of fiscal 1997 as a result of a restructuring program to
further consolidate functions and operations in North America, Europe, and
the Far East, and to reduce or eliminate certain other operations. The
restructuring is expected to be completed by October 1997.
The restructuring plan includes further consolidation of hardside luggage
production to Samsonite's largest U.S. facility located in Denver, Colorado
from other locations in the Americas, as well as eventual consolidation of
many administrative and control functions to Denver. The plan includes the
elimination of as many as 450 positions worldwide, including approximately
150 manufacturing positions and approximately 300 managerial, office and
clerical positions. The restructuring provision consists primarily of
costs associated with involuntary employee terminations and is comprised of
cash expenses of $9,670,000 and non-cash expenses of $1,000,000, both on a
pretax basis. The lenders under the Company's Senior Credit Facility have
agreed not to consider the restructuring provision in the computation of
certain financial covenants. Through January 31, 1997, the Company had
incurred approximately $5,500,000 of the restructuring provision and
terminated 372 positions.
F-12
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Fiscal 1996
-----------
In the fourth quarter of fiscal 1996, management initiated a plan to
restructure the manufacturing and various administrative functions of its
American Tourister division. The restructuring plan included relocation of
manufacturing operations from Jacksonville, Florida to the Company's
Denver, Colorado manufacturing facility. Certain administrative functions
were also consolidated in Denver. A provision for restructuring and
corresponding liability of $2,369,000 was recorded in fiscal 1996 primarily
for costs associated with involuntary employee terminations and the
disposal of assets. The restructuring plan included the termination of 137
employees by August 1996. This restructuring was completed during fiscal
1997 with actual costs incurred and the number of employees terminated
approximating plan.
<TABLE>
<CAPTION>
(4) INVENTORIES
Inventories consisted of the following:
January 31,
-------------------
1997 1996
-------- --------
(In thousands)
<S> <C> <C>
Raw materials and supplies $ 38,532 35,827
Work in process 10,842 10,959
Finished goods 85,697 68,950
-------- -------
$135,071 115,736
======== =======
(5) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
January 31,
-------------------
1997 1996
-------- --------
(In thousands)
Land $ 13,324 14,172
Buildings 62,561 62,281
Machinery, equipment and other 121,875 106,511
-------- -------
197,760 182,964
Less accumulated depreciation and amortization (53,801) (42,052)
-------- -------
$143,959 140,912
======== =======
</TABLE>
F-13
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Property, plant and equipment includes property and equipment under
capital leases as follows:
<TABLE>
<CAPTION>
January 31,
-----------------
1997 1996
(In thousands)
<S> <C> <C>
Buildings $ 4,856 4,759
Machinery, equipment and other 2,323 2,179
------ ------
7,179 6,938
Less accumulated amortization (1,090) (1,625)
------ -------
$ 6,089 5,313
====== =======
(6) INTANGIBLE ASSETS
The following is a summary of intangible assets, net of accumulated amortization:
January 31,
----------------
1997 1996
(In thousands)
<S> <C> <C>
Reorganization value in excess of identifiable
assets $ -- 22,947
Tradenames 115,838 119,549
Licenses, patents and other 11,817 16,996
-------- -------
$127,655 159,492
======== =======
</TABLE>
(7) SHORT-TERM DEBT
As of January 31, 1997 and 1996, the Company had $2,095,000 and
$9,487,000 of debt outstanding under foreign lines of credit,
respectively. To the extent certain European lines are used, amounts are
secured by standby letters of credit on the Senior Credit Facility
described in note 8, which reduces availability on the Senior Credit
Facility. No such lines were used at January 31, 1997. At January 31,
1996, $11,394,000 of short-term borrowings were classified as long-term
obligations because they were secured by letters of credit under the
Senior Credit Facility (see note 8) and could have been refinanced on a
long-term basis if not renewed. During the year ended January 31, 1997,
the weighted average interest rate on foreign short-term borrowings was
6.85% and the average effective rate at January 31, 1997 was 7.50%. The
European subsidiaries had unused available borrowings on foreign lines of
credit and other foreign borrowing arrangements totaling approximately
$60 million as of January 31, 1997, which are generally restricted for
working capital purposes.
Other foreign subsidiaries had approximately $7.8 million available under
bank credit lines at January 31, 1997.
F-14
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(8) LONG-TERM OBLIGATIONS
Long-term obligations represent long-term debt and capital lease
obligations as follows:
<TABLE>
<CAPTION>
Pro
Forma* January 31,
January 31, ------------------
1997 1997 1996
------------- -------- -------
(Unaudited)
(In thousands)
<S> <C> <C> <C>
Series B Senior Subordinated Notes (a) $109,200 190,000 190,000
Senior Credit Facility (b) 3,300 50,000 58,000
Short-term obligations expected to be refinanced -- -- 11,394
Other (c) 45,526 45,526 46,900
Capital lease obligations (d) 5,091 5,091 4,665
-------- ------- -------
163,117 290,617 310,959
Less current installments (12,862) (22,862) (16,306)
-------- ------- --------
$150,255 267,755 294,653
======== ======= ========
</TABLE>
*Unaudited pro forma long-term obligations gives effect to a stock offering
completed February 11, 1997, the exercise of stock options in connection with
the offering, and the use of proceeds therefrom. See note 17.
(a) Series B Senior Subordinated Notes
On July 14, 1995, the Company redeemed the 11 1/2% Senior Secured Notes in
the principal amount of $375,217,000. The redemption price included a
contractual early redemption premium of $18,000,000 which, net of
unamortized premium $4,369,000 and income tax benefit of $5,589,000, is
included in the consolidated statement of operations for the year ended
January 31, 1996 as an extraordinary loss on extinguishment of debt. The
Senior Secured Notes were redeemed with the proceeds from the issuance of
11 1/8% Series A Senior Subordinated Notes, the repayment of $112 million
of intercompany debt from discontinued operations (see note 2), and
borrowings under the Company's Senior Credit Facility. The 11 1/8% Series A
Senior Subordinated Notes were later exchanged for 11 1/8% Series B Senior
Subordinated Notes (the "Series B Notes") having substantially the same
terms.
Interest on the Series B Notes is payable semiannually with principal due
July 15, 2005. The Series B Notes may be redeemed after July 15, 2000 with
the payment of certain redemption premiums; however, up to one-third of the
outstanding Series B Notes may be redeemed (at a premium) before July 15,
1998, from the proceeds of the first two public equity offerings the
Company completes. As described in note 17, the Company completed a public
equity offering on February 11, 1997 and used a portion of the proceeds of
the offering to redeem $63,300,000 of the Series B Notes and purchase an
additional $17,500,000 of the Series B Notes in the market. The terms of
the Series B Notes include financial covenants to maintain certain
financial ratios similar to those contained in the Company's Senior Credit
Facility (see (b) below). Additionally, covenants restrict payment of any
dividends, amounts of additional debt issuances, asset sales, and amounts
of investments in emerging market subsidiaries.
F-15
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(b) Senior Credit Facility
As of January 31, 1997, the Senior Credit Facility provides for a $45
million term loan and a $175 million revolving credit facility. At January
31, 1997, the outstanding term loan, revolving credit borrowings, and
letters of credit issued under the facility were $45.0 million, $5.0
million, and $46.6 million, respectively. Available borrowings were $123.4
million at January 31, 1997. Included in letters of credit outstanding is
a $39.5 million standby letter of credit issued to secure certain long-
term debt of foreign subsidiaries (see (c) below).
Borrowings under the agreement accrue interest at rates adjusted
periodically depending on the Company's financial performance as measured
by certain financial ratios measured each quarter. At January 31, 1997,
loans outstanding under the Senior Credit Facility bear interest at 7.18%.
A commitment fee on the unused revolving credit facility is also payable
quarterly at a rate adjusted periodically depending on the Company's
financial performance.
The term loan portion of the facility is repayable over an approximate four
year period which began October 31, 1996 (two quarterly installments of
$2,500,000 each were paid in fiscal 1997). Payments of $2,500,000 per
quarter are due for the period April 30, 1997 through July 31, 1998 and
quarterly payments of $3,750,000 are due from October 31, 1998 through
April 30, 2000 with the remaining unpaid balance due on July 14, 2000. In
accordance with the terms of the Senior Credit Facility, the Company
prepaid four quarterly principal payments due beginning April 30, 1997
totaling $10 million out of the proceeds of the public equity offering
completed on February 11, 1997, and also repaid the remaining $35 million
outstanding on the term loan (see note 17). The amount available under the
revolving credit facility of $175 million is reduced quarterly beginning
October 31, 1997 in varying amounts to $131.25 million at the maturity date
of the facility, July 14, 2000.
The facility is secured by substantially all the Company's U.S. assets, the
capital stock of its principal domestic subsidiaries, and 66% of the stock
of principal foreign subsidiaries.
The agreement contains financial covenants which require the Company to
maintain certain debt, working capital and interest coverage ratios and
minimum amounts of earnings exclusive of interest, taxes, and noncash
charges. The agreement also contains covenants limiting the amount of
capital expenditures, investments in certain subsidiaries, and dividends,
among other restrictions. Under the agreement, the Company has no amount
available for the payment of dividends at January 31, 1997.
(c) Other
As of January 31, 1997, other obligations consist of various notes payable
to banks by foreign subsidiaries aggregating $40.6 million and a $4.9
million secured financing arrangement with a European leasing corporation.
The obligations bear interest at varying rates and mature through 2002.
Certain foreign subsidiaries had approximately $10.0 million available
under long-term credit agreements at January 31, 1997.
F-16
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(d) Leases
Future minimum payments under noncancelable leases at January 31, 1997
were as follows:
<TABLE>
<CAPTION>
Capital Operating
leases leases
------------- ------------
<S> <C> <C>
(In thousands)
Year ending January 31:
1998 $ 1,482 10,227
1999 1,432 9,026
2000 1,369 6,060
2001 574 4,199
2002 530 2,791
Thereafter 1,680 8,443
------- ------
Total minimum lease payments 7,067 40,746
======
Less amount representing interest (1,976)
-------
Present value of net minimum
capital lease payments 5,091
Less current installments of minimum capital
lease payments (949)
-------
Long-term obligation under capital leases,
excluding current installments $ 4,142
=======
</TABLE>
Rental expense under cancelable and noncancelable operating leases
pertaining to continuing operations consisted of the following:
<TABLE>
<CAPTION>
Year ended January 31,
--------------------------------
<S> <C> <C> <C>
1997 1996 1995
---- ---- ----
(In thousands)
Minimum rentals $10,723 8,650 7,580
Contingent rentals 714 523 434
------- ----- -----
$11,437 9,173 8,014
======= ===== =====
</TABLE>
F-17
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Aggregate maturities of long-term obligations at January 31, 1997 were as
follows (in thousands):
<TABLE>
Year ending January 31:
<S> <C>
1998 $ 21,913
1999 24,424
2000 24,353
2001 22,101
2002 751
Thereafter 191,984
--------
285,526
Obligations under capital leases 5,091
--------
Total $290,617
========
</TABLE>
Amounts of long-term obligations retired subsequent to January 31, 1997
(see note 17) are classified in the above table according to originally
scheduled maturity dates.
(9) EMPLOYEE STOCK OPTIONS AND AWARDS
At January 31, 1997, the Company has outstanding options under its 1995
Stock Option and Incentive Award Plan and under employment agreements with
its current and former chief executive officer. The Company applies
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and related intepretations, in accounting for stock options.
Accordingly, no compensation cost has been recognized for stock options
granted at exercise prices at or above fair market value at the date of
grant. Compensation cost that has been charged to expense for performance-
based options was $1,699,000 for the year ended January 31, 1995 (none in
fiscal 1996 or 1997). The Financial Accounting Standards Board has issued
Statement of Financial Accounting Standards No. 123, Accounting for Stock
Based Compensation ("SFAS 123") which provides for an alternative method
of recognizing compensation expense for stock options based upon a fair
value determination. The Company has elected not to adopt the recognition
and measurement provisions of SFAS 123. Had the Company determined
compensation cost for the stock options based on the fair value at the
grant dates consistent with the provisions of SFAS 123, net loss and net
loss per share would have been increased to the pro forma amounts as
follows:
<TABLE>
<CAPTION>
Year ended January 31,
---------------------------------------
<S> <C> <C>
1997 1996
---- ----
(In thousands, except per share amounts)
Net loss:
As reported $(11,323) (61,447)
======== =======
Pro forma $(12,922) (61,781)
======== =======
Loss per share:
As reported $ (0.71) (3.89)
======== =======
Pro forma $ (0.81) (3.91)
======== =======
</TABLE>
F-18
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions used for
grants in the years ended January 31, 1997 and 1996: no dividend yield for both
years; expected volatility of 28% for both years; weighted-average risk-free
interest rate of 6.2% for both years; and weighted average expected lives of 3.5
years for fiscal 1997 and 1.8 years for fiscal 1996. Options granted during
the year ended January 31, 1996 were granted at exercise prices which
significantly exceeded the market value of the stock at the grant date.
Pro forma net loss reflects only options granted in the years ended January 31,
1997 and 1996. Therefore, the full impact of calculating compensation cost for
stock options under SFAS 123 is not reflected in the pro forma net loss amounts
presented above because compensation cost is reflected over option vesting
periods (ranging from 2 to 5 years) and compensation cost for options granted
prior to February 1, 1995 is not considered.
Directors' Stock Plan
In fiscal 1996, the Company adopted the Samsonite Corporation 1996 Directors'
Stock Plan (the "Plan") and reserved 200,000 shares of its common stock for
issuance under the Plan. Under the Plan, each non-employee director may elect
to receive common stock for directors' fees valued at fair market value in lieu
of cash. At January 31, 1997, 513 shares of common stock had been issued under
the Plan.
1995 Stock Option and Incentive Award Plan
The 1995 Stock Option and Incentive Award Plan (as Amended in 1996) ("the 1995
Plan") reserves 2,550,000 shares for the issuance of options as determined by
the compensation committee of the Board of Directors. The 1995 Plan provides for
the issuance of a variety of awards, including tax qualified incentive stock
options, nonqualified stock options, stock appreciation rights, restricted stock
awards or other forms of awards consistent with the purposes of the plan.
Incentive stock options must be issued at exercise prices no less than the
market value of the common stock at the date of the grant. Nonqualified stock
options may be granted at option prices at or below the market value, but not at
less than 50% of the market value of the common stock at the date of the grant.
Options granted under the plan may vest over a period of not more than ten years
as determined by the compensation committee. At January 31, 1997, all awards
under the 1995 Plan were nonqualified incentive stock options issued at option
prices equal to, or in excess of, the market value at the date of grant.
Chief Executive Officer Employment Agreement
On May 15, 1996, the Company retained a new Chief Executive Officer, Richard R.
Nicolosi. Pursuant to his employment contract, the Company has granted Mr.
Nicolosi options to purchase 425,532 shares of common stock at an exercise price
of $18.25 per share (subject to customary antidilution adjustments). Options to
purchase 186,170 shares of common stock (the "Series A Options") are time-
vesting options and options to purchase 239,362 shares of common stock (the
"Series B Options") are subject to certain performance requirements with respect
to accelerating vesting. The options have a five-year term. Fifty percent
(50%) of the Series A Options will vest on May 15, 1997 and the remaining fifty
percent (50%) will vest on May 15, 1998, so long as Mr. Nicolosi remains
continually employed by the Company through such date. All of the Series B Op
tions shall vest on April 15, 2001, so long as he remains continually employed
by the Company through April 15, 2001, subject to accelerated, performance-based
vesting as follows. The Series B
F-19
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Options will vest on May 15, 1998 if Mr. Nicolosi remains continually employed
by the Company through such date and the average market value of the common
stock equals or exceeds $30.00 per share in any period of 30 consecutive days
prior to May 15, 1998. Notwithstanding the foregoing, if a change of control
event occurs prior to May 15, 1998, (i) all of the Series A Options will auto
matically vest and (ii) all of the Series B Options will vest if Mr. Nicolosi
remains continually employed by the Company through the date of such event and
either the average market value of the common stock in any period of 30
consecutive days prior to such event or the market value of the common stock as
of the date of such event, equals or exceeds $30.00 per share. During fiscal
1997, the Company's common stock did reach an average market value of $30.00 per
share for 30 consecutive days.
Also in connection with the performance by Mr. Nicolosi of services pursuant to
his employment, the Company issued to Mr. Nicolosi 60,000 shares of restricted
common stock (the "Restricted Shares"). Fifty percent (50%) of the Restricted
Shares will vest on May 15, 1997 and the remaining fifty percent (50%) will vest
on May 15, 1998; provided that if a change of control event occurs and Mr.
Nicolosi remains continually employed by the Company through the date of such
event, then all Restricted Shares that have not vested will become vested as of
the date of such event. The Company is recognizing compensation expense for the
market value ($18.25 per share) of the shares at the date of grant over the two-
year vesting period.
Additionally, on June 6, 1996, the Company sold and issued to Mr. Nicolosi
55,000 shares of common stock at the market value of $18.25 per share, or an
aggregate purchase price of $1,003,750.
Former Chief Executive Officer
Pursuant to an employment agreement with the former Chief Executive Officer
(CEO) dated April 13, 1995, certain options previously granted were canceled and
options to purchase 653,668 shares (granted June 8, 1993 at market value) became
fully vested and exercisable at $11.87 per share, as adjusted by the terms of
the option agreement for the spinoff of the water treatment business. Under the
employment agreement, the former CEO was also granted options for 500,000 shares
at $24.85 per share and 1,000,000 shares at $32.85 per share, as adjusted by the
terms of the option agreement for the spinoff of the water treatment business.
Options for 300,000 of such shares lapsed. The remaining options for 1,200,000
shares became fully exercisable upon the cessation of the former CEO's
employment as of May 15, 1996. On February 11, 1997, the former CEO exercised
all outstanding options for a total of 1,853,668 shares. The exercise price was
paid by the return of 889,450 shares owned by the former CEO to the Company and
cash of $6,622,139. See note 17.
Also under the employment agreement, the Company sold 425,532 shares of common
stock to the former CEO for a $10 million promissory note which was presented in
the accompanying consolidated financial statements as a reduction of
stockholders' equity. The note was repaid in full on October 11, 1996. The
note bore interest at 8 1/8% per annum and the Company agreed to pay the former
CEO additional compensation equal to the interest due on the note.
Other Options and Stock Awards
In October 1996, a former officer exercised options to purchase 17,500 shares
granted under an individual stock option agreement at an exercise price of
$11.14 per share.
F-20
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Effective May 15, 1996, the Company entered into agreements with three executive
officers to provide stock bonuses to each of them of 38,889 shares of common
stock, payable if the executive remains continually employed by the Company
through the earlier of May 15, 1999 or one year after a change of control event.
The Company is recognizing compensation expense equal to the market value of the
shares at May 15, 1996 ($18.25 per share) over the three-year vesting period.
Stock Option Summary
A summary of stock option transactions follows:
<TABLE>
<CAPTION>
Year ended January 31,
--------------------------------------------------
1997 1996
---- ----
Weighted- Weighted-
Average Average
Exercise Exercise
Shares Price Shares Price
------ ----- ------ -----
<S> <C> <C> <C> <C>
Outstanding at beginning
of year 2,171,168 $24.51 671,168 $11.85
Granted 2,754,142 $25.52 1,500,000 $30.18
Exercised (28,870) $11.18 -- --
Forfeited (317,368) $30.47 -- --
---------- ---------
Outstanding at end of year 4,579,072 $24.79 2,171,168 $24.51
========== =========
Options exercisable at end
of year 2,176,945 $22.67 671,168 $11.85
========== =========
Weighted-average fair value
of options granted during
the year $ 7.59 $ 1.04
========== ==========
</TABLE>
The following table summarizes information about stock options outstanding
at January 31,1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------------------------- ------------------------------
Weighted-Average
Range of Number Remaining Weighted-Average Number Weighted-Average
Exercise Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
- --------------- ------------ ----------------- --------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$10.875 to $20.75 1,461,051 5.3 years $16.28 298,393 $15.04
$35.50 to $42.75 1,264,353 9.4 years $36.18 24,884 $35.50
--------- ---------
2,725,404 323,277
========= =========
$11.87 to $32.85* 1,853,668 .3 years $23.73 1,853,668 $23.73
========= =========
</TABLE>
*Comprised of options held by the former CEO which were exercised on February
11, 1997 (see note 17).
F-21
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(10) INCOME TAXES
Income tax expense (benefit) attributable to income (loss) from
continuing operations consists of:
<TABLE>
<CAPTION>
Current Deferred Total
------- -------- -----
(In thousands)
<S> <C> <C> <C>
Year ended January 31, 1997:
U.S. federal $ 923 1,408 2,331
Foreign 7,443 (249) 7,194
U.S. state and local 658 206 864
----- ----- ------
$9,024 1,365 10,389
===== ===== ======
Year ended January 31, 1996:
U.S. federal $ (426) 1,944 1,518
Foreign 5,699 257 5,956
U.S. state and local 1,013 608 1,621
----- ----- ------
$6,286 2,809 9,095
===== ===== ======
Year ended January 31, 1995:
U.S. federal $1,245 2,324 3,569
Foreign 6,142 (368) 5,774
U.S. state and local 1,286 (10) 1,276
----- ----- ------
$8,673 1,946 10,619
====== ===== ======
</TABLE>
Income tax expense (benefit) attributable to income (loss) from
continuing operations differed from the amounts computed by applying the
U.S. federal income tax rate of 34% as a result of the following:
<TABLE>
<CAPTION>
Year ended January 31,
-------------------------------------
1997 1996 1995
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Computed "expected" tax expense (benefit) $ 36 (13,829) (12,123)
Increase (decrease) in taxes resulting
from:
Tax rate differential on foreign
earnings 3,320 3,609 3,034
Amortization of intangibles 7,746 18,668 18,668
State taxes, net of federal benefit 570 1,070 842
Other, net (1,283) (423) 198
------- ------ ------
Income tax expense $10,389 9,095 10,619
======= ====== ======
</TABLE>
F-22
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The tax effects of temporary differences that give rise to significant portions
of the net deferred tax asset are presented below:
<TABLE>
<CAPTION>
January 31,
-----------------------------
1997 1996
---- ----
(In thousands)
<S> <C> <C>
Deferred tax assets:
Allowance for uncollectible accounts receivable
and other receivables $ 7,513 8,252
Inventory costs capitalized for tax purposes 1,194 842
Other accruals and reserves accrued for
financial reporting purposes 40,364 46,623
Postretirement benefits accrued for financial
reporting purposes 6,636 6,508
Net operating loss carryforwards 54,197 61,535
------- -------
Total gross deferred tax assets 109,904 123,760
Less:
Valuation allowance (33,961) (44,311)
------- -------
Deferred tax assets, net of valuation
allowance 75,943 79,449
------- -------
Deferred tax liabilities:
Plant, equipment and intangibles, due to
differences as a result of fresh start 54,340 53,799
Plant and equipment, due to differences in
depreciation methods 9,738 17,614
Other accruals and reserves 6,421 2,314
------- ------
Total gross deferred tax liabilities 70,499 73,727
------- ------
Net deferred tax asset $ 5,444 5,722
======= ======
</TABLE>
F-23
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The components of the net current deferred tax asset and net noncurrent deferred
tax liability were as follows:
<TABLE>
January 31,
----------------------------------------
1997 1996
---- ----
(In thousands)
<S> <C> <C>
Net current deferred tax asset:
U.S. federal $ 28,361 32,142
Foreign 2,115 --
U.S. state and local 5,889 6,618
------- ------
36,365 38,760
------- ------
Net noncurrent deferred tax liability:
U.S. federal 10,172 12,544
Foreign 16,958 16,179
U.S. state and local 3,791 4,315
------- ------
30,921 33,038
------- ------
Net deferred tax asset $ 5,444 5,722
======= ======
</TABLE>
The valuation allowance for deferred tax assets was reduced from $44,311,000 at
January 31, 1996 to $33,961,000 at January 31, 1997. The reduction resulted
from the expiration of certain net operating loss carryforwards which had been
reserved for in the valuation allowance. Management of the Company believes
that it is more likely than not that the results of future operations will
generate sufficient taxable income to realize the net deferred tax asset of
$5,444,000 at January 31, 1997. If the Company should recognize a tax benefit
for pre-reorganization net operating losses, for which a valuation allowance had
been established, it would be applied to reduce intangible assets until
exhausted and then to increase additional paid-in capital.
At January 31, 1997, the Company has net operating loss carryforwards of
approximately $142,000,000 for federal income tax purposes, expiring at various
dates through 2012. As a result of the reorganization, the Company had a change
in ownership as defined by Section 382 of the Internal Revenue Code.
Consequently, utilization of the net operating loss carryforward is subject to
an annual limitation of $17,200,000 per year. In fiscal 1995, as a result of the
sale of a portion of the apparel manufacturing business, the Company recognized
a "built-in gain" which allowed utilization of net operating loss carryforwards
in excess of the annual limitation. In addition, certain of the net operating
loss carryforwards are limited to offsetting future taxable income of certain
members of the consolidated group.
Deferred income taxes have been provided on undistributed earnings of foreign
subsidiaries to the extent that management plans to remit these earnings in the
future. Undistributed earnings of foreign subsidiaries and affiliates that are
permanently invested and for which no deferred taxes have been provided amounted
to approximately $73,000,000 and $69,200,000 as of January 31, 1997 and 1996,
respectively.
F-24
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(11) PENSION AND OTHER EMPLOYEE BENEFITS
Certain subsidiaries of the Company have pension plans which provide
retirement benefits for eligible employees, generally measured by length of
service, compensation and other factors.
Net pension cost of continuing operations included the following
components:
<TABLE>
<CAPTION>
Year ended January 31,
-------------------------------------
1997 1996 1995
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Service cost $ 2,576 2,466 2,697
Interest cost 6,435 6,521 6,041
Actual return (income) loss on plan assets (14,472) (21,990) 314
Net amortization and deferral 6,711 14,792 (7,424)
-------- ------ -----
Net pension cost $ 1,250 1,789 1,628
======== ====== =====
</TABLE>
The funded status of the plans at January 31, 1997 and 1996 was as follows:
<TABLE>
<CAPTION>
Plans with Plans with
assets exceeding accumulated benefits
accumulated benefits exceeding assets
-------------------- ----------------
1997 1996 1997 1996
---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C>
Projected benefit obligation for service
rendered to date $ 59,617 63,481 30,464 29,641
Plan assets at fair value 89,017 78,715 24,501 21,045
-------- -------- ------ -------
Plan assets in excess (deficiency) of
projected benefit obligation 29,400 15,234 (5,963) (8,596)
Unrecognized prior service cost (80) (88) 1,357 315
Unrecognized net gain (21,341) (8,895) (4,355) (2,069)
-------- -------- ------ -------
Prepaid (accrued) pension cost
included in other assets
(liabilities) $ 7,979 6,251 (8,961) (10,350)
======== ======== ====== =======
Accumulated benefit obligation:
Vested $ 45,420 53,376 28,864 28,501
======== ======== ====== =======
Nonvested $ 1,063 214 1,160 163
======== ======== ====== =======
</TABLE>
Net periodic pension cost during the years ended January 31, 1997, 1996 and
1995 assumed an expected long-term rate of return on plan assets of 7.5% to
8.5% for domestic plans and 7.5% to 15% for foreign plans. The valuations
of the projected benefit obligation assumed weighted-average discount rates
of 7.0% to 7.25% for domestic plans and 7.5% to 13% for foreign plans at
January 31, 1997, and 7.0% to 7.25% for domestic plans and 7.5% to 12% for
foreign plans at January 31, 1996. The rate of increase in future
compensation levels ranged from 4.25% to 5% for domestic plans and 5.5% to
10% for foreign plans at January 31, 1997 and 1996.
F-25
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Plan assets are primarily invested in cash equivalents, equity securities
and fixed income instruments. The plans do not have significant liabilities
other than benefit obligations. The Company's funding policy is to
contribute amounts equal to the minimum funding requirements of ERISA.
The Company sponsors defined contribution plans, qualified under Sections
401(a) and 401(k) of the Internal Revenue Code, which are offered to
certain groups of employees of substantially all U.S. operations. Expense
related to continuing operations for these plans was $1,237,000,
$1,052,000, and $1,088,000 for the years ended January 31, 1997, 1996, and
1995, respectively.
The Company provides postretirement health care benefits primarily for
certain groups of employees of substantially all U.S. operations.
Qualifying employees become eligible for these benefits upon reaching
normal or early retirement age, and if they have accumulated the specified
number of years of service. The Company recognizes the cost of providing
postretirement health care benefits over the employee's service period.
Postretirement benefit costs were as follows:
<TABLE>
<CAPTION>
Year ended January 31,
--------------------------------
1997 1996 1995
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Service cost - benefits earned during period $ 486 699 665
Interest cost on projected benefit obligation 684 907 935
Other (314) (169) (95)
----- ----- -----
Total postretirement benefit costs $ 856 1,437 1,505
===== ===== =====
</TABLE>
The health care cost trend rates used to measure the expected cost in each
of the years in the three-year period ended January 31, 1997 were between
10% and 15%, graded down to an ultimate trend rate of between 5.5% and 6.0%
to be achieved over the next 10 years. The effect of a one-percentage-point
increase in the health care cost trend rate for future periods would
increase the annual postretirement benefit cost by $137,000. The
accumulated postretirement benefit obligation would increase by $814,000.
The weighted average discount rate used in determining the actuarial
present value of the projected benefit obligation was 7.25% at January 31,
1997 and 1996.
The funded status of the postretirement plans were as follows:
<TABLE>
<CAPTION>
January 31,
-------------------------
1997 1996
---- ----
(In thousands)
<S> <C> <C>
Plan assets at fair value $ -- --
Accumulated postretirement benefit
obligation (10,468) (9,697)
Unrecognized cumulative net gain (6,092) (6,494)
------- ------
Postretirement benefit liability
included in other liabilities $(16,560) (16,191)
======= =======
</TABLE>
F-26
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(12) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to
estimate that value:
Cash and Cash Equivalents, Trade Receivables, Accounts Payable, Short-term
Debt, and Accrued Expenses
The carrying amount approximates fair value because of the short maturity
or duration of these instruments.
Series B Senior Subordinated Notes
There is no established public trading market for the Company's Series B
Senior Subordinated Notes. The Company estimates that the fair value of the
Series B Senior Subordinated Notes at January 31, 1997 approximates
$214,700,000 based on recent interdealer transactions which were priced at
approximately 113.
Senior Credit Facility and Other Long-Term Obligations
The carrying value approximates the fair value of these instruments, which
primarily have floating interest rates that are fixed for periods not
exceeding six months.
Foreign Currency Forward Delivery Contracts
The fair value of foreign currency forward delivery contracts (see note 1n)
is estimated by reference to market quotations received from banks. At
January 31, 1997 and 1996, the contract value of foreign currency forward
delivery agreements outstanding was approximately $50,644,000 and
$32,245,000, respectively. The settlement value of these instruments was
approximately $50,025,000 and $31,768,000, respectively. Because of a
strengthening of the U.S. dollar against most currencies subsequent to
January 31, 1997, the Company has realized gains on settled contracts of
approximately $750,000 and unrealized gains on open contracts of
approximately $3,550,000 at March 17, 1997. The amount of gains ultimately
realized on open contracts is subject to future changes in exchange rates.
Limitations
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates are subjective in nature and involve uncertainties and
matters of significant judgment and therefore cannot be determined with
precision. Changes in assumptions could significantly affect the
estimates.
(13) LITIGATION, COMMITMENTS AND CONTINGENCIES
Obligations to Settlement Trust
In June 1993, as a part of the consummation of Astrum's Plan of
Reorganization, a trust (the "Trust") was established for the benefit of
the holders of certain classes of pre-bankruptcy claims against Astrum (the
"Trust Beneficiaries"). In connection with the creation of the Trust,
Astrum contributed certain assets (the "Trust Property") to the Trust
including (i) certain assets and agreements representing legal claims
against Meshulam Riklis, a previous owner of Astrum, and certain
companies and persons associated with him (collectively, the "Riklis
Entities"), (ii) certain claims and
F-27
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
causes of action held by Astrum against the Riklis Entities, and (iii)
certain portions of Astrum's interest in a compromise and settlement
agreement (the "McCrory Settlement Agreement") with McCrory Corporation, a
company that was formerly controlled by Mr. Riklis and that is a debtor in
its own bankruptcy case ("McCrory"). Astrum also assigned to the Trust, and
the Trust assumed, all the claims and causes of action held by the Riklis
Entities against Astrum. The stated purposes of the Trust are (i) to
resolve, through litigation, settlement or otherwise, the claims of the
Trust against the Riklis Entities and the claims of the Riklis Entities
against the Trust, (ii) to collect the Trust Property and reduce it to
cash, (iii) to determine and satisfy all the liabilities created by the
Trust and (iv) to distribute to the Trust Beneficiaries any balance
remaining after the payment of liabilities.
The creation of the Trust permitted Astrum to emerge from bankruptcy
without first resolving the various claims between Astrum and the Riklis
Entities, and it relieved Astrum of liability in respect to the claims of
the Riklis Entities.
The terms of the Trust require Astrum to make loans to the Trust, in the
amount of up to $37 million in the aggregate, that will provide funds for
the operation of the Trust and to pay resolved claims and to make certain
distributions to holders of claims against the Trust. As of January 31,
1997, Astrum had made loans to the Trust in the aggregate amount of $4.8
million, all of which remain outstanding. Under the terms of the Trust,
the Trust may not repay the $4.8 million loan until all claims against it
have been satisfied. During fiscal 1997, the Trust disbursed approximately
$25.3 million to the McCrory bankruptcy estate to settle the only allowed
claim which has been made against the Trust. Other than current
administrative expenses, the only other potential obligations of the Trust
are the potential claims of the Riklis Entities. Any assets remaining in
the Trust after the payment of expenses and claims will be used to repay
all amounts borrowed from the Company, including the $4.8 million loan,
before any distributions are made to the Trust Beneficiaries. The Company
has been advised that the claims by and against the Riklis Entities are the
subject of current negotiations and that no lawsuits have been commenced.
As of January 31, 1997, the Trust has approximately $32 million in cash
assets and a liability for the note payable to the Company of $4.8 million.
Consequently, the Company does not anticipate being required to loan any
additional amounts to the Trust. Additionally, assuming that the Riklis
Entities cannot establish any monetary claims against the Trust, the
Company believes there will be sufficient funds to repay the $4.8 million
loan from the Company plus accrued interest. For financial statement
purposes, however, the Company continues to fully reserve for the loan to
the Trust.
Contingent Pension Liabilities
The Pension Benefit Guaranty Corporation ("PBGC") filed certain contingent
claims, in excess of $37.7 million, with respect to Astrum's Chapter 11
case for statutory liability for unfunded benefits accrued under the
Schenley Industries, Inc. ("Schenley") Employees Retirement and Benefit
Plan and the McCrory Pension Plan (collectively, the "Plans"). Schenley and
McCrory are former affiliates of Astrum. The PBGC also filed claims against
Astrum in respect to the Plans for due and unpaid contributions and unpaid
insurance premiums.
While the Company neither sponsored nor maintained the Plans, it was a
member of a "controlled group" of related companies, as defined by the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). As
such, the Company would have been jointly and severally liable under ERISA
for unfunded benefit liabilities in the event the Plans terminated and for
any unpaid minimum funding contributions and insurance premiums. At the
time of the reorganization, the Company entered into temporary agreements
with the PBGC under which the Company agreed to be contingently liable for
each of the Plans and permanent agreements with McCrory and Schenley which
gave the Company the right to assume sponsorship of either Plan, at its
election, when a cumulative
F-28
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
arrearage of contributions to either Plan equals or exceeds $1 million.
These agreements also confirmed the agreement of McCrory and Schenley to
the permanent cessation of benefit accruals and to the making of any plan
amendments that would increase benefit liabilities under the Plans without
the consent of the Company. The right to assume sponsorship of the Plans
allows the Company to avoid having the PBGC terminate the Plans and make a
claim against the Company for the PBGC regulatory prescribed termination
value. This termination value is substantially higher than the liability
would be for the Company to assume sponsorship and fund the Plans over
their remaining lives. Permanent agreements were entered into among the
PBGC, the Company, and McCrory and Schenley in June 1996 which became
effective on August 6, 1996 when the Bankruptcy Court entered an order
approving the agreements. The permanent agreements impose limitations on
PBGC actions against the Company in respect to benefit liabilities under
the Plans, including the requirement that the PBGC proceed against McCrory
and Schenley before proceeding against the Company. Although they are in
reorganization, McCrory and Schenley continued to fund the obligations of
the Plans until January 15, 1997, when a required quarterly contribution of
$363,000 was not made to one of the Plans. The Company can provide no
assurance that it will not become necessary to assume sponsorship of the
Plans and become primarily liable for their funding.
The liability originally recorded in 1993 of $37.7 million was recorded on
the basis of actuarial assumptions established by the PBGC for use at the
time pension plans are terminated. As a result of the aforementioned
permanent agreements giving the Company the right to assume sponsorship of
the Plans, the Company has evaluated the liability using actuarial
assumptions consistent with the assumption of plan sponsorship, and has
adjusted the other noncurrent liability to $26.6 million. This amount
represents management's best estimate of the contingent liability based on
the pension benefit obligation of the Plans discounted at 7.25% reduced by
the market value of the Plans' assets. The corresponding reduction in the
liability of $11.1 million is recorded in other nonoperating income. The
Company will periodically reassess the amount of the liability for the
effects of changes in circumstances and assumptions.
Contingent Liability with Respect to the Old Notes
The reorganization plan provides for payment in full of 100% of the
allowed claim of the holders of certain old notes ("Old Notes") of E-II
Holdings, Inc. (predecessor to Astrum), including approximately $16.4
million of interest on overdue installments of interest accruing prior to
the commencement of Astrum's bankruptcy case. Various parties have
challenged the allowability of the claim on the basis that interest on
overdue installments of interest is not permitted under applicable non-
bankruptcy law. The Company provided for this contingent liability in its
consolidated financial statements when it emerged from bankruptcy in the
amount of $16.4 million.
During fiscal 1997, $4.0 million of such claims were settled for $0.2
million, resulting in the recording of $3.8 million of other nonoperating
income from the favorable settlement of the claim. The holders of the
claim were Apollo Investment Fund, L.P. ("Apollo") and an affiliate of
Apollo. At January 31, 1997, Apollo and its affiliates own 45.75% of the
Company's issued and outstanding common stock. The remaining recorded
liability of $12.4 million at January 31, 1997 is included in other accrued
expenses.
In a hearing on November 14, 1996, the Bankruptcy Court ruled in favor
of the Company on a motion to disallow all claims asserted by the holders
of Old Notes on the basis that compound interest was not allowed under
applicable law at the time the bond contracts were entered into. The
ruling is subject to appeal, and the Company has not made any adjustment to
the remaining recorded liability of $12.4 million pending expiration of the
appeal period or completion of the appeal process.
F-29
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Union Agreements
Union membership in the Company's six European manufacturing plants varies
from country to country and is not officially known; however, it is
probable that most of the workers are affiliated with a union. Most
European union contracts have a one-year term. Substantially all of the
Company's United States production employees are unionized under a contract
which is renewed every three years.
Other Contingent Obligations
In addition, the Company is a party to various legal proceedings and claims
in the ordinary course of business. The Company does not believe that the
outcome of any pending matters will have a material adverse affect on its
consolidated financial position, results of operations or liquidity.
(14) OTHER INCOME (EXPENSE) - NET
Other income (expense) - net from continuing operations consisted of the
following:
<TABLE>
<CAPTION>
Year ended January 31,
----------------------------------------
1997 1996 1995
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Loss on disposition of fixed assets, net $ (62) (245) (880)
Foreign currency transaction gains (losses), net 2,618 (2,154) (1,707)
Gain on sale of television station -- 5,368 --
Rental income 1,987 1,735 1,425
Favorable settlement of claim (note 13) 3,802 -- --
Adjustment of liability for PBGC claims (note 13) 11,100 -- --
Loss of unconsolidated affiliates (33) -- (1,560)
Royalties (a) -- -- 3,490
Other, net (591) (737) 1,961
------- ------ ------
$18,821 3,967 2,729
======= ====== ======
</TABLE>
(a) The excess of amounts received over the discounted amount recorded at the
fresh start date for a royalty interest retained by the Company in certain
operations discontinued and sold (see note 2).
F-30
<PAGE>
(15) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following is a summary of the unaudited quarterly financial
information:
<TABLE>
<CAPTION>
Three months ended
-------------------------------------------------
April 30, July 31, October 31, January 31,
1996 1996 1996 1997
------ ------ ------ ------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net sales $169,867 179,440 203,817 188,014
======== ======= ======= =======
Gross profit $ 68,665 68,692 80,404 74,044
======== ======= ======= =======
Income (loss) from continuing
operations $(10,802) (6,183) 3,372 2,290
======== ======= ======= =======
Net income (loss) $(10,802) (6,183) 3,372 2,290
======== ======= ======= =======
Income (loss) per share from $ (0.68) (0.39) 0.22 0.14
continuing operations ======== ======= ======= =======
Income (loss) per share $ (0.68) (0.39) 0.22 0.14
======== ======= ======= =======
Three months ended
--------------------------------------------------
April 30, July 31, October 31, January 31,
1995 1995 1995 1996
-------- ------- ------- -------
(In thousands, except per share amounts)
Net sales $157,753 167,670 180,284 169,502
======== ======= ======= =======
Gross profit $ 63,965 64,167 70,117 62,269
======== ======= ======= =======
Loss from continuing operations $(13,357) (9,449) (11,364) (16,984)
======== ======= ======= =======
Net loss $(13,357) (17,491) (11,364) (19,235)
======== ======= ======= =======
Loss per share from continuing operations $ (0.86) (0.59) (0.72) (1.07)
======== ======= ======= =======
Loss per share $ (0.86) (1.10) (0.72) (1.21)
======== ======= ======= =======
</TABLE>
F-31
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(16) INDUSTRY AND GEOGRAPHICAL AREA INFORMATION
The Company operates primarily in one industry consisting of the
manufacture, marketing, and distribution of luggage, including softside and
hardside suitcases, garment bags, casual bags, business cases and other
travel bags. The Company's operations in non-luggage products and licensing
of non-luggage products are not significant.
Certain geographical data was as follows:
<TABLE>
<CAPTION>
Year ended January 31,
----------------------------------
1997 1996 1995
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Net sales:
United States $428,450 378,723 390,559
Europe 285,841 276,219 232,733
Other 43,551 27,881 16,064
Eliminations (16,704) (7,614) (3,904)
-------- -------- -------
$741,138 675,209 635,452
======== ======== =======
Operating income (loss):
United States $ 20,023 22,323 34,469
Europe 28,492 27,569 18,493
Other (1,640) (1,265) 4,148
-------- -------- -------
46,875 48,627 57,110
Unallocated costs - net (31,338) (58,003) (60,530)
-------- -------- -------
Operating income (loss) $ 15,537 (9,376) (3,420)
======== ======== =======
January 31,
---------------------------------
1997 1996
---- ----
(In thousands)
Identifiable assets:
United States $ 342,148 344,733
Europe 169,696 182,660
Other 39,035 22,977
Corporate 41,779 57,073
---------- -------
Total $ 592,658 607,443
========== =======
</TABLE>
Net sales and operating income in the United States includes export sales
and the resulting operating income for products produced within the United
States.
Operating income (loss) represents net sales less operating expenses. In
computing operating income (loss) none of the following items have been
added or deducted: interest income, interest expense, income taxes, other-
net, minority interest, operations discontinued and sold and extraordinary
item.
F-32
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
General corporate expenses and amortization of reorganization value in
excess of identifiable assets are included in unallocated costs-net.
Identifiable assets by geographic area are those assets that are used in
the Company's operations in each geographic area. Corporate assets consist
of inactive corporations which hold cash, fixed assets, other receivables,
investments and reorganization value in excess of identifiable assets.
For its foreign subsidiaries, the Company translates net assets at exchange
rates prevailing at the period ending date. Income and expenses are
translated at the average exchange rate during the period.
Net assets of the foreign subsidiaries were $124,047,000 and $109,107,000
at January 31, 1997 and 1996, respectively. Included as a reduction to
stockholders' equity is the cumulative foreign currency translation
adjustment amounting to $5,337,000 and $2,338,000 at January 31, 1997 and
1996, respectively.
(17) SUBSEQUENT EVENT - PUBLIC STOCK OFFERING
On February 11, 1997, the Company completed the sale of 3,300,000 shares of
its common stock in a public offering and received net proceeds therefrom
of approximately $130.4 million. In addition, the former CEO (see note 9)
exercised options for 1,853,668 common shares and sold these shares in the
public offering. The Company received approximately $6.6 million in cash
from the exercise of these options. The total of the proceeds from this
offering and the exercise of the stock options of approximately $137.0
million has been applied as follows: (i) $89.5 million to redeem and
purchase in the market $80.8 million principal amount of Series B Notes,
including $8.7 million for early redemption and market premiums, (ii) $45.0
million to repay amounts outstanding on the term loan under the Senior
Credit Facility, and (iii) $2.5 million for payment of accrued interest
($0.8 million) and revolving credit borrowings under the Senior Credit
Facility ($1.7 million). See note 8 for a description of the Series B Notes
and the Senior Credit Facility.
The accompanying unaudited pro forma consolidated balance sheet and pro
forma summary of long-term obligations included in note 8 give effect to
the public offering, the exercise of the stock options and the tax effects
thereof, the application of the net proceeds to retire indebtedness and pay
accrued interest, and a charge for the write-off of deferred financing
costs, as if such transactions had occurred as of January 31, 1997.
F-33
<PAGE>
SAMSONITE CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
- -------- -------- -------- -------- -------- --------
Balance at Balance
Beginning at End
Description of Period Additions(a) Transfers Deductions(b) of Period
- ----------- --------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
YEAR ENDED JANUARY 31, 1997
Allowance for Trade Receivables $ 8,152 2,815 -- (3,536) 7,431
Allowance for Long-Term Assets 10,104 -- -- (4,548) 5,556
------- ------- ------- ------- -------
Total $18,256 2,815 -- (8,084) 12,987
======= ======= ======= ======= =======
YEAR ENDED JANUARY 31, 1996
Allowance for Trade Receivables $ 6,888 2,172 -- (908) 8,152
Allowance for Long-Term Assets 9,698 455 -- (49) 10,104
------- ------- ------- ------- -------
Total $16,586 2,627 -- (957) 18,256
======= ======= ======= ======= =======
YEAR ENDED JANUARY 31, 1995
Allowance for Trade Receivables $ 5,949 959 -- (20) 6,888
Allowance for Other Receivables 5,499 -- -- (5,499) --
Allowance for Long-Term Assets 11,545 239 -- (2,086) 9,698
------- ------- ------- ------- -------
Total $22,993 1,198 -- (7,605) 16,586
======= ======= ======= ======= =======
</TABLE>
Notes:
(a) Amounts charged to costs and expenses.
(b) Bad debt write-offs and charges to allowances, net of other adjustments,
reclassifications and exchange rate changes.
F-34
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
<S> <C>
EXHIBIT DESCRIPTION
- ------- -------------------------------------------------------------------------------------------------------
2.1 Distribution Agreement dated as of July 14, 1995, between the Company and Culligan Water Technologies,
Inc. /1/
2.2 Tax Sharing Agreement dated as of July 14, 1995, between the Company and Culligan Water Technologies,
Inc./1/
2.3 Company's Second Amended Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, dated February
17, 1993 (the "Plan")./2/
2.4 Modification of the Plan, dated May 21, 1993./3/
2.5 Notice to holders of Senior Subordinated Notes regarding the Stock Elections described in the Plan./3/
2.6 Order of the United States Bankruptcy Court for the Southern District of New York, dated May 25, 1993,
confirming the Plan and authorizing and directing certain actions in connection therewith./3/
3.1 Amended and Restated Certificate of Incorporation of the Company./6/
3.2 Certificate of Ownership and Merger dated July 14, 1995./1/
3.3 By-Laws of the Company./6/
4.1 Indenture, dated as of July 14, 1995, between the Company and United States Trust Company of New
York./1/
4.2 Specimen of Notes described in the Indenture./1/
10.1 Credit Agreement, dated July 14, 1995, among the Company and the Banks named therein (excluding
schedules and exhibits thereto)./1/
10.2 First Amendment to said Credit Agreement, dated as of December 27, 1995./6/
10.3 Second Amendment to said Credit Agreement, dated as of April 30, 1996./7/
10.4 Third Amendment to said Credit Agreement, dated as of July 1, 1996./8/
10.5 Fourth Amendment to said Credit Agreement, dated as of October 15, 1996./9/
10.6 Fifth Amendment to said Credit Agreement, dated as of February 11, 1997.
- ---- ------------------------------------------------------------------------
10.7 Stock Option Agreement dated as of May 15, 1996, between the Company and Richard R. Nicolosi./10/
10.8 Form of Indemnification Agreement entered into or to be entered into by the Company with each of R.
Theodore Ammon, Leon D. Black, Robert H. Falk, Thomas J. Leonard, Marc J. Rowan, Stephen J. Solarz,
Gregory Wm. Hunt, Carl C. Ichan, Mark H. Rachesky, and Robert L. Rosen./3/
10.9 Employment Agreement, dated as of April 13, 1995, between the Company, its former subsidiary which was
merged into the Company on July 14, 1995, and Steven J. Green./4/
</TABLE>
E-1
<PAGE>
<TABLE>
<S> <C>
10.10 Stock Option Agreement, dated as of April 13, 1995, between the Company and Steven J. Green (without
schedules)./4/
10.11 Stock Purchase and Loan Agreement, dated as of April 13, 1995, between the Company and Steven J.
Green./4/
10.12 Registration Rights Agreement, dated as of April 13, 1995, between the Company and Steven J. Green./4/
10.13 Stock Option Plan and Agreement dated as of August 18, 1994, by and between the Company and Gregory Wm.
Hunt./5/
10.14 Share Option Agreement, dated as of June 8, 1993, between the Company and Steven J. Green./3/
10.15 Restricted Share Agreement, dated as of June 8, 1993, between the Company and Steven J. Green./3/
10.16 1993 Incentive Plan./3/
10.17 Employment Agreement, dated as of April 18, 1995, between Samsonite and Thomas J. Leonard./6/
10.18 Employment Agreement, dated as of May 1, 1995, between the Company and Thomas R. Sandler./6/
10.19 Employment Agreement, dated as of June 25, 1990, between Samsonite GmbH and Karlheinz Tretter./6/
10.20 Consulting Agreement, dated as of January 1, 1992, as amended, between Samsonite Europe N.V. and Luc
Van Nevel./3/
10.21 Executive Management Agreement, dated January 1, 1992, between the Company and Luc Van Nevel./3/
10.22 Samsonite Corporation 1995 Stock Option and Incentive Award Plan./1/
10.23 Samsonite Corporation 1995 Stock Option and Incentive Award Plan (as Amended in 1996)./12/
10.24 Samsonite Corporation 1995 Stock Option and Award Plan, Second Amendment./11/
10.25 Stock Option Agreement, dated as of February 20, 1996, between the Company and Thomas J. Leonard./6/
10.26 Stock Option Agreement, dated as of February 20, 1996, between the Company and Thomas R. Sandler./6/
10.27 Stock Option Agreement, dated as of February 20, 1996, between the Company and Luc Van Nevel./6/
10.28 Stock Option Agreement, dated as of February 20, 1996, between the Company and Karlheinz Tretter./6/
10.29 Employment Agreement, dated as of May 15, 1996, between the Company and Richard R. Nicolosi./7/
10.30 Registration Rights Agreement, dated as of May 15, 1996, between the Company and Richard R.
Nicolosi./7/
10.31 Stock Sale Agreement, dated as of May 16, 1996, between the Company and Richard R. Nicolosi./7/
10.32 Form of Agreement, made as of May 15, 1996, between the Company and each of Thomas J. Leonard, Luc Van
Nevel, and Thomas R. Sandler, each agreement with respect to 38,889 shares of the Common Stock of the
Company, par value $.01 per share./7/
</TABLE>
E-2
<PAGE>
<TABLE>
<S> <C>
10.33 Form of Stock Option Agreement for Awards under the 1995 Stock Option and Incentive Award Plan (as
Amended in 1996)./10/
10.34 Samsonite Corporation Directors Stock Plan./12/
10.35 Final Settlement Agreement, made as of June 20, 1996, among the Company, the Pension Benefit Guaranty
Corporation, and others named therein (including exhibits thereto), with respect to the Schenley
Pension Plan./8/
10.36 Final Settlement Agreement, made as of June 20, 1996, among the Company, the Pension Benefit Guaranty
Corporation, and others named therein (including exhibits thereto), with respect to the McCrory Pension
Plan./8/
10.37 Purchase Agreement, dated as of June 13, 1996, between the Company and Artemis America Partnership and
Apollo Investment Fund, L.P./8/
10.38 Employment Agreement effective as of August 1, 1996, between the Company and John P. Murtagh./9/
10.39 Employment Agreement effective as of September 16, 1996, between the Company and Robert P. Baird,
Jr./9/
10.40 Employment Agreement effective as of August 4, 1996, between the Company and James E. Barch./9/
10.41 Employment Agreement effective as of September 10, 1996, between the Company and Gary D. Ervick./9/
10.42 Stock Option Agreement dated as of August 1, 1996, between the Company and John P. Murtagh./9/
10.43 Stock Option Agreement dated as of September 16, 1996, between the Company and Robert P. Baird, Jr./9/
10.44 Stock Option Agreement dated as of August 5, 1996, between the Company and James E. Barch./9/
10.45 Stock Option Agreement dated as of August 21, 1996, between the Company and Gary D. Ervick./9/
10.46 Stock Option Agreement, dated as of October 29, 1996, between the Company and Thomas R. Sandler.
- ----- -----------------------------------------------------------------------------------------------
10.47 Stock Option Agreement, dated as of October 29, 1996, between the Company and Karlheinz Tretter.
- ----- -----------------------------------------------------------------------------------------------
10.48 Stock Option Agreement, dated as of January 16, 1997, between the Company and Gary D. Ervick.
- ----- --------------------------------------------------------------------------------------------
10.49 Form of Stock Option Agreement for Awards under the 1995 Stock Option and Incentive Award Plan
- ----- ----------------------------------------------------------------------------------------------
(as Amended in 1996).
---------------------
21 Subsidiaries of the Company
- -- ---------------------------
23 Consent of KPMG Peat Marwick LLP
- -- --------------------------------
27 Financial Data Schedule
- -- -----------------------
</TABLE>
- -----------------------------------------
E-3
<PAGE>
Note: Documents which are underlined above appear herein. The others are
incorporated by reference as follows:
1 Incorporated by reference from the Registration Statement on Form S-4
(Registration No. 33-95642).
2 Incorporated by reference from Application for Qualification of Indenture
on Form T-3 (File No. 22-24448).
3 Incorporated by reference from Registration Statement on Form S-1
(Registration No. 33-71224).
4 Incorporated by reference from the Company's Current Report on Form 8-K
filed April 24, 1995 (File No. 0-23214).
5 Incorporated by reference from the Company's Annual Report on Form 10-K
for the fiscal year ended January 31, 1995 (File No. 0-23214).
6 Incorporated by reference from the Company's Annual Report on Form 10-K
for the fiscal year ended January 31, 1996 (File No. 0-23214).
7 Incorporated by reference from the Company's Quarterly Report on Form 10-
Q for the three months ended April 30, 1996 (File No. 0-23214).
8 Incorporated by reference from the Company's Quarterly Report on Form 10-
Q for the three months ended July 31, 1996 (File No. 0-23214).
9 Incorporated by reference from the Company's Quarterly Report on Form 10-
Q for the three months ended October 31, 1996 (File No. 0-23214).
10 Incorporated by reference from Registration Statement on Form S-8 filed
June 7, 1996 (File No. 333-05467).
11 Incorporated by reference from Registration Statement on Form S-8 filed
January 30, 1997 (File No. 333-20775).
12 Incorporated by reference from Proxy Statement filed May 23, 1996.
E-4
<PAGE>
EXHIBIT 10.6
-1-
- --------------------------------------------------------------------------------
FIFTH AMENDMENT
TO REVOLVING CREDIT AND TERM LOAN AGREEMENT
- --------------------------------------------------------------------------------
Fifth Amendment dated as of February 11, 1997 to Revolving Credit and
Term Loan Agreement (this "Amendment"), by and among SAMSONITE CORPORATION, a
Delaware corporation (the "Company") and THE FIRST NATIONAL BANK OF BOSTON, BANK
OF AMERICA ILLINOIS and the other lending institutions listed on Schedule 1 to
----------
the Credit Agreement (as hereinafter defined) (collectively, the "Lenders"),
amending certain provisions of the Revolving Credit and Term Loan Agreement
dated as of July 14, 1995 (as amended by the First Amendment thereto dated as of
December 27, 1995, the Second Amendment thereto dated as of April 30, 1996, the
Third Amendment thereto dated as of July 1, 1996, the Fourth Amendment thereto
dated as of October 15, 1996 and as the same may be further amended, modified,
supplemented, and in effect from time to time, the "Credit Agreement") by and
among the Company, the Lenders, THE FIRST NATIONAL BANK OF BOSTON and BANK OF
AMERICA ILLINOIS as managing agents for the Lenders (in such capacity, the
"Managing Agents"), BANK OF AMERICA ILLINOIS as documentation agent for the
Managing Agents and the Lenders and THE FIRST NATIONAL BANK OF BOSTON as
administrative agent for the Managing Agents and the Lenders. Terms not
otherwise defined herein which are defined in the Credit Agreement shall have
the same respective meanings herein as therein.
WHEREAS, the Company and the Lenders have agreed to modify certain terms
and conditions of the Credit Agreement as specifically set forth in this
Amendment;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
(S)1. AMENDMENTS TO THE CREDIT AGREEMENT. Subject to the
---------- -- --- ------ ---------
satisfaction of the applicable conditions precedent set forth in (S)2 hereof,
the Credit Agreement is hereby amended as follows:
(S)1.1 APPLICABLE MARGIN. Effective as of February 11, 1997,
-----------------
subparagraph (a) of the definition of Applicable Margin is hereby amended to
read as follows:
(a) for purposes of interest on Loans outstanding,
Commitment Fee Rate and Documentary Letter of Credit Fee Rate (i)
with respect to the period commencing on the Redemption Notice Date
through the date immediately preceding the Adjustment Date
occurring on March 22, 1997,
<PAGE>
-2-
the Applicable Margin shall be the Applicable Margin set forth in
Tier 2 above; and (ii) with respect to each of (1) the period
commencing with the Adjustment Date occurring on March 22, 1997
thorough the date immediately preceding the Adjustment Date
occurring on June 19, 1997 and (2) the period commencing with the
Adjustment Date occurring on June 19, 1997 through the date
immediately preceding the Adjustment Date occurring on September
19, 1997, the Applicable Margin for each such period shall be
determined by reference to the Leverage Ratio determined for the
applicable fiscal periods ending January 31, 1997 and April 30,
1997, respectively, provided that, notwithstanding the terms of the
definition of the Leverage Ratio, for purposes of such two specific
Applicable Margin calculations only, the numerator portion of the
Leverage Ratio (clause (a) of the definition thereof) shall
reflect, without duplication, the applicable reduction (if any) in
the outstanding principal of the Subordinated Notes resulting from
the Redemption and any Open Market Purchases which are permitted
pursuant to (S)10.8 hereof and which have occurred on or prior to
the date the applicable Compliance Certificate prepared as of the
end of the relevant fiscal period is actually delivered to the
Managing Agents pursuant to and in accordance with (S)9.4(d) hereof
(but only if such Open Market Purchases are reflected and described
in reasonable detail in such Compliance Certificate and the
Subordinated Notes so purchased have been cancelled by the
Company), as if such reductions had occurred on January 31, 1997,
or April 30, 1997, as the case may be.
(S)1.2 ADDITIONAL DEFINITIONS. Section 1.1 of the Credit
----------------------
Agreement is hereby further amended by inserting the following definitions in
the appropriate alphabetical order:
February 1997 Equity Issuance. The Equity Issuance in
-------- ---- ------ --------
February 1997 by the Company of 3,000,000 shares of the Company's
capital stock pursuant to a registration statement on Form S-3
(File No. 333-18405) on the February 1997 Equity Issuance Closing
Date.
February 1997 Equity Issuance Closing Date. The date in
-------- ---- ------ -------- ------- ----
February 1997 on which the February 1997 Equity Issuance is
consummated and the Company receives Net Cash Proceeds from such
February 1997 Equity Issuance of not less than $80,000,000 in the
aggregate.
Open Market Purchases. The purchase by the Company of all
---- ------ ---------
or any portion of the Subordinated Notes from the holders thereof
so long as the total, cumulative amount of the consideration paid
for all such purchases does not exceed, in the aggregate,
$20,000,000, and the Subordinated Notes so purchased in each case
are promptly cancelled by the Company.
<PAGE>
-3-
Redemption. The redemption by the Company on the Redemption Date of
----------
$63,300,000 of the principal amount of the Subordinated Notes pursuant
to the second paragraph of Section 5 of each of the Subordinated Notes and
Article III of the Subordinated Indenture, for the Redemption Price.
Redemption Date. The date on which the Redemption is consummated in
---------------
accordance with the terms, conditions and covenants set forth in the
second paragraph of Section 5 of each of the Subordinated Notes and
Article III of the Subordinated Indenture.
Redemption Notice Date. The date on which the February 1997 Equity
----------------------
Issuance Closing Date has occurred, the Company has given a notice of the
Redemption to the Indenture Trustee, and the Company or the Indenture
Trustee, as the case may be, has mailed a notice of the Redemption to the
holders of the Subordinated Notes being redeemed in accordance with, and
in compliance with, the provisions of Section 3.4 of the Subordinated
Indenture.
Redemption Price. A price equal to 110.125% of the principal amount
----------------
of the Subordinated Notes being redeemed pursuant to the Redemption,
together with accrued and unpaid interest on such Subordinated Notes,
which price shall not exceed $70,000,000 in the aggregate.
(S)1.3 RESTRICTIONS ON INVESTMENTS. Section 10.3 of the
---------------------------
Credit Agreement is hereby amended by (a) deleting the word "and" which appears
immediately at the end of the text of (S)10.3(v); (b) deleting the period which
appears at the end of (S)10.3(w) and substituting in place thereof a semicolon
and the word "and", and the following:
(x) by the Company consisting of the Redemption and Open Market
Purchases of Subordinated Notes, to the extent permitted by (S)10.8 hereof, so
long as no Default or Event of Default has occurred and is continuing and none
would exist after giving effect thereto.
(S)1.4 DISTRIBUTIONS. Section 10.4 of the Credit Agreement is
-------------
hereby amended by (a) deleting the word "and" which appears immediately before
the roman numeral "(iv)" in (S)10.4; and (b) deleting the period which appears
at the end of (S)10.4 and substituting in place thereof a semicolon and the
following:
and (v) so long as no Default or Event of Default has occurred
and is continuing and none would exist after giving effect thereto, a
Distribution by the Company consisting of the acceptance by the Company of
approximately 889,450 shares in the aggregate of its capital stock held by
Green or his Affiliates and tendered as part of the exercise price
received by the Company (together with a certain amount of cash, if any)
from Green or his Affiliates in connection with
<PAGE>
-4-
Green's (or such Affiliates') exercise of certain options held by him
(or such Affiliates) to purchase approximately 1,853,668 shares of the
capital stock of the Company.
(S)1.5 MERGER, CONSOLIDATION AND DISPOSITION OF ASSETS.
-----------------------------------------------
Section 10.5.1(d)(xiii) of the Credit Agreement is hereby amended by
inserting immediately after the words "less the cumulative amount required
to be prepaid to the Lenders pursuant to (S)4.3.3" which appear in
(S)10.5.1(d)(xiii) the words "less the Redemption Price paid or to be paid
to the holders of the Subordinated Notes from the Net Cash Proceeds of the
February 1997 Equity Issuance as permitted by (S)10.8 hereof upon the
Redemption and less the cumulative amount paid to the holders of the
Subordinated Notes in connection with any Open Market Purchases as
permitted by (S)10.8 hereof,".
(S)1.6 SUBORDINATED DEBT. Section 10.8 of the Credit
-----------------
Agreement is hereby amended by inserting immediately after the end of the
text of (S)10.8 a semicolon followed by the words "provided, however, so
-------- -------
long as no Default or Event of Default has occurred and is continuing and
none would exist after giving effect thereto, (a) the Company shall be
permitted on the Redemption Date to effect the Redemption of a portion of
the Subordinated Notes with Net Cash Proceeds of the February 1997 Equity
Issuance in an aggregate amount not exceeding the Redemption Price, and
(b) in the event the amount of the Net Cash Proceeds of the February 1997
Equity Issuance is equal to or greater than $100,000,000, the Company
shall be permitted on or after the Redemption Notice Date to make Open
Market Purchases."
(S)2. CONDITIONS TO EFFECTIVENESS. This Amendment shall become
----------------------------
effective on February 11, 1997 (the "Amendment Date") in the manner, and to the
extent, provided below, subject to the satisfaction of the following applicable
conditions precedent on or prior to such date:
(a) The effectiveness of (S)1.1 hereof (the "Special Approval
Provision") shall be subject to the receipt, on or prior to the Amendment Date,
by the Administrative Agent of one or more counterparts of this Amendment with
the applicable signature pages indicating consent and agreement to the Special
Approval Provision signed by each of the Obligors and each of the Lenders, the
Issuing Banks, the Swing Line Lenders, and the Agents, as well as the
satisfaction of the conditions set forth in paragraph (c) below;
(b) The effectiveness of the remaining provisions of this Amendment
other than the Special Approval Provision (the "Majority Approval Provisions")
(including, without limitation, Section 2 of this Amendment) shall be subject to
the receipt, on or prior to the Amendment Date, by the Administrative Agent of
one or more counterparts of this Amendment with the applicable signature pages
indicating consent and agreement to the Majority Approval Provisions signed by
each of the Obligors and the Majority Lenders, as well as the satisfaction of
the conditions set forth in paragraph (c) below; and
<PAGE>
-5-
(c) The effectiveness of each provision of this Amendment shall be
further subject to the receipt, on or prior to the Amendment Date, by the
Administrative Agent of the following:
(i) evidence satisfactory to the Administrative Agent that each
of the February 1997 Equity Issuance Closing Date and the Redemption
Notice Date has actually occurred, together with information in
reasonable detail as to the Net Cash Proceeds received by the
Company from the February 1997 Equity Issuance, which Net Cash
Proceeds must be in an amount of not less than $80,000,000; and
(ii) evidence satisfactory to the Administrative Agent that the
Company has prepaid in accordance with (S)4.3.3 of the Credit
Agreement not less than $10,000,000 of the outstanding principal
amount of the Term Loan on the February 1997 Equity Issuance Closing
Date from the Net Cash Proceeds of the February 1997 Equity
Issuance.
(S)3. REPRESENTATIONS AND WARRANTIES. The Company hereby repeats,
------------------------------
on and as of the date hereof and the Amendment Date, each of the representations
and warranties made by it in (S)8 of the Credit Agreement (except to the extent
of changes resulting from matters contemplated or permitted by the Credit
Agreement and the other Loan Documents, changes occurring in the ordinary course
of business that singly or in the aggregate are not materially adverse, and to
the extent that such representations and warranties relate expressly to an
earlier date), provided, that all references therein to the Credit Agreement
--------
shall refer to such Credit Agreement as amended hereby. In addition, the
Company hereby represents and warrants that the execution and delivery by the
Company of this Amendment and the performance by the Company of all of its
agreements and obligations under this Amendment and the Credit Agreement as
amended hereby are within the corporate power and authority of the Company and
have been duly authorized by all necessary corporate action on the part of the
Company, and further represents and warrants that the execution and delivery by
the Company of this Amendment and the performance by the Company of the
transactions contemplated hereby (including, without limitation, the February
1997 Equity Issuance, the Redemption and the Open Market Purchases) will not
contravene any term or condition set forth in any agreement or instrument to
which the Company is a party or by which the Company is bound, including but not
limited to the Subordinated Indenture.
(S)4. RATIFICATION, ETC. Except as expressly amended hereby, the
------------ ---
Credit Agreement and all documents, instruments and agreements related thereto,
including, but not limited to the Security Documents, are hereby ratified and
confirmed in all respects and shall continue in full force and effect. The
Credit Agreement and this Amendment shall be read and construed as a single
agreement. This Amendment shall constitute one of the Loan Documents, and the
obligations of the Obligors under this Amendment shall constitute Obligations
for all purposes of the Loan Documents. All references in the Credit Agreement,
the Loan Documents or any related agreement or instrument to the Credit
Agreement shall hereafter refer to the Credit Agreement as amended hereby.
<PAGE>
-6-
(S)5. NO WAIVER. Nothing contained herein shall constitute a waiver
---------
of, impair or otherwise adversely affect any Obligations, any other obligation
of the Company or any rights of the Agents or the Lenders consequent thereon.
(S)6. COUNTERPARTS. This Amendment may be executed in one or more
------------
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same instrument.
(S)7. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT
REFERENCE TO CONFLICT OF LAWS).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
-7-
IN WITNESS WHEREOF, the parties hereto have executed this Amendment under
seal by their respective officers thereunto duly authorized.
[Signature Pages Follow]
<PAGE>
-8-
Signature Pages for Borrowers and Guarantors
--------- ----- --- --------- --- ----------
The undersigned Borrower hereby consents and agrees to all of the
provisions of the foregoing Amendment:
The Company: SAMSONITE CORPORATION
--- -------
By: /s/ THOMAS R. SANDLER
---------------------
Name: Thomas R. Sandler
-----------------
Title: CFO & Treasurer
---------------
Each of the undersigned Guarantors hereby acknowledges and consents to
all of the provisions of the foregoing Amendment and agrees that its Guarantee
dated as of July 14, 1995, in favor of the Lenders and the Agents, and all other
Loan Documents to which such Guarantor is a party, remain in full force and
effect, and each of the undersigned Guarantors confirms and ratifies all of its
obligations thereunder.
The Guarantors: A.T. RETAIL, INC.
--- ----------
By: /s/ THOMAS R. SANDLER
---------------------
Name: Thomas R. Sandler
-----------------
Title: CFO & Treasurer
---------------
MCGREGOR CORPORATION
By: /s/ THOMAS R. SANDLER
---------------------
Name: Thomas R. Sandler
-----------------
Title: CFO & Treasurer
---------------
<PAGE>
-9-
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the Special Approval
Provision of the foregoing Amendment:
THE FIRST NATIONAL BANK OF BOSTON, as
Lender, Issuing Bank, Swing Line Lender,
Administrative Agent, and Managing Agent
By: /s/ RICHARD D. HILL, Jr.
-------------------------
Name: Richard D. Hill, Jr.
--------------------
Title: Director
--------
The undersigned Lender hereby consents and agrees to the Majority
Approval Provisions of the foregoing Amendment:
THE FIRST NATIONAL BANK OF BOSTON, as
Lender, Issuing Bank, Swing Line Lender,
Administrative Agent, and Managing Agent
By: /s/ RICHARD D. HILL, Jr.
-------------------------
Name: Richard D. Hill, Jr.
--------------------
Title: Director
--------
<PAGE>
-10-
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the Special Approval
Provision of the foregoing Amendment:
BANK OF AMERICA ILLINOIS, as Lender, Issuing
Bank, Swing Line Lender, Documentation Agent,
and Managing Agent
By: /s/ ELIZABETH R. BOROW
-----------------------
Name: Elizabeth R. Borow
------------------
Title: Managing Director
------------------
The undersigned Lender hereby consents and agrees to the Majority
Approval Provisions of the foregoing Amendment:
BANK OF AMERICA ILLINOIS, as Lender, Issuing
Bank, Swing Line Lender, Documentation Agent,
and Managing Agent
By: /s/ ELIZABETH R. BOROW
------------------------
Name: Elizabeth R. Borow
------------------
Title: Managing Director
-----------------
<PAGE>
-11-
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the Special Approval
Provision of the foregoing Amendment:
BHF-BANK AKTIENGESELLSCHAFT
NEW YORK BRANCH
By: /s/ PERRY FORMELI
-------------------
Name: Perry Formeli
-------------
Title: Vice President
--------------
By: /s/ DAN DOBRJANSKYJ
-------------------
Name: Dan Dobrjanskyj
---------------
Title: Assistant Treasurer
-------------------
The undersigned Lender hereby consents and agrees to the Majority
Approval Provisions of the foregoing Amendment:
BHF-BANK AKTIENGESELLSCHAFT
NEW YORK BRANCH
By: /s/PERRY FORMELI
----------------
Name: Perry Formeli
-------------
Title: Vice President
--------------
By: /s/ DAN DOBRJANSKYJ
--------------------
Name: Dan Dobrjanskyj
---------------
Title: Assistant Treasurer
-------------------
<PAGE>
-12-
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the Special Approval
Provision of the foregoing Amendment:
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD.
By: /s/ PAUL B. CLIFFORD
--------------------
Name: Paul B. Clifford
----------------
Title: Deputy General Manager
----------------------
The undersigned Lender hereby consents and agrees to the Majority
Approval Provisions of the foregoing Amendment:
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD.
By: /s/ PAUL B. CLIFFORD
--------------------
Name: Paul B. Clifford
----------------
Title: Deputy General Manger
---------------------
<PAGE>
-13-
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the Special Approval
Provision of the foregoing Amendment:
THE MITSUBISHI TRUST AND
BANKING CORPORATION, LOS
ANGELES AGENCY
By: /s/ YASUSHI SATOMI
------------------
Name: Yasushi Satomi
--------------
Title: Senior Vice President
---------------------
The undersigned Lender hereby consents and agrees to the Majority
Approval Provisions of the foregoing Amendment:
THE MITSUBISHI TRUST AND
BANKING CORPORATION, LOS
ANGELES AGENCY
By: /s/ YASUSHI SATOMI
------------------
Name: Yasushi Satomi
--------------
Title: Senior Vice President
---------------------
<PAGE>
-14-
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the Special Approval
Provision of the foregoing Amendment:
CITY NATIONAL BANK
By: /s/DAVID A. NELSON
-------------------
Name: David A. Nelson
---------------
Title: Vice President
--------------
The undersigned Lender hereby consents and agrees to the Majority
Approval Provisions of the foregoing Amendment:
CITY NATIONAL BANK
By: /s/ DAVID A. NELSON
-------------------
Name: David A. Nelson
---------------
Title: Vice President
--------------
<PAGE>
-15-
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the Special Approval
Provision of the foregoing Amendment:
THE BANK OF NEW YORK
By: /s/ ROBERT LOUK
---------------
Name: Robert Louk
-----------
Title: Vice President
--------------
The undersigned Lender hereby consents and agrees to the Majority
Approval Provisions of the foregoing Amendment:
THE BANK OF NEW YORK
By: /s/ ROBERT LOUK
---------------
Name: Robert Louk
-----------
Title: Vice President
---------------
<PAGE>
-16-
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the Special Approval
Provision of the foregoing Amendment:
BANQUE FRANCAISE DU COMMERCE
EXTERIEUR
By: /s/ DANIEL TOUFFU
-----------------
Name: Daniel Touffu
-------------
Title: First VP and Regional Manager
-----------------------------
By: /s/ IAIN A. WHYTE
------------------
Name: Iain A. Whyte
-------------
Title: Vice President
--------------
The undersigned Lender hereby consents and agrees to the Majority
Approval Provisions of the foregoing Amendment:
BANQUE FRANCAISE DU COMMERCE
EXTERIEUR
By: /s/ DANIEL TOUFFU
------------------
Name: Daniel Touffu
-------------
Title: First VP and Regional Manager
-----------------------------
By: /s/ IAIN A. WHYTE
-----------------
Name: Iain A. Whyte
-------------
Title: Vice President
--------------
<PAGE>
-17-
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the Special Approval
Provision of the foregoing Amendment:
BANQUE PARIBAS
By: /s/ MARY T. FINNEGAN
--------------------
Name: Mary T. Finnegan
----------------
Title: Group Vice President
--------------------
By: /s/ ROBERT G. CARINO
--------------------
Name: Robert G. Carino
----------------
Title: Vice President
--------------
The undersigned Lender hereby consents and agrees to the Majority
Approval Provisions of the foregoing Amendment:
BANQUE PARIBAS
By: /s/ MARY T. FINNEGAN
--------------------
Name: Mary T. Finnegan
----------------
Title: Group Vice President
--------------------
By: /s/ ROBERT G. CARINO
--------------------
Name: Robert G. Carino
----------------
Title: Vice President
--------------
<PAGE>
-18-
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the Special Approval
Provision of the foregoing Amendment:
CREDIT LYONNAIS NEW YORK
BRANCH
By: /s/ FREDERICK HADDAD
--------------------
Name: Frederick Haddad
----------------
Title: Senior Vice President
---------------------
The undersigned Lender hereby consents and agrees to the Majority
Approval Provisions of the foregoing Amendment:
CREDIT LYONNAIS NEW YORK
BRANCH
By: /s/ FREDERICK HADDAD
--------------------
Name: Frederick Haddad
----------------
Title: Senior Vice President
---------------------
<PAGE>
-19-
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the Special Approval
Provision of the foregoing Amendment:
CREDIT LYONNAIS CAYMAN
ISLAND BRANCH
By:
Name:
Title:
The undersigned Lender hereby consents and agrees to the Majority
Approval Provisions of the foregoing Amendment:
CREDIT LYONNAIS CAYMAN
ISLAND BRANCH
By:
Name:
Title:
<PAGE>
-20-
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the Special Approval
Provision of the foregoing Amendment:
GENERALE BANK
By: /s/ E. MATTHEWS
---------------
Name: E. Matthews
-----------
Title: Senior Vice President
---------------------
The undersigned Lender hereby consents and agrees to the Majority
Approval Provisions of the foregoing Amendment:
GENERALE BANK
By: /s/ E. MATTHEWS
---------------
Name: E. Matthews
-----------
Title: Senior Vice President
---------------------
<PAGE>
-21-
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the Special Approval
Provision of the foregoing Amendment:
KREDIETBANK NV
By: /s/ ROBERT SNAUFFER
-------------------
Name: Robert Snauffer
---------------
Title: Vice President
--------------
By: /s/ RAYMOND F. MURRAY
---------------------
Name: Raymond F. Murray
-----------------
Title: Vice President
--------------
The undersigned Lender hereby consents and agrees to the Majority
Approval Provisions of the foregoing Amendment:
KREDIETBANK NV
By: /s/ ROBERT SNAUFFER
-------------------
Name: Robert Snauffer
---------------
Title: Vice President
--------------
By: /s/ RAYMOND F. MURRAY
---------------------
Name: Raymond F. Murray
-----------------
Title: Vice President
--------------
<PAGE>
-22-
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the Special Approval
Provision of the foregoing Amendment:
NATIONAL CITY BANK
By: /s/ BARRY C. ROBINSON
---------------------
Name: Barry C. Robinson
-----------------
Title: Vice President
--------------
The undersigned Lender hereby consents and agrees to the Majority
Approval Provisions of the foregoing Amendment:
NATIONAL CITY BANK
By: /s/ BARRY C. ROBINSON
---------------------
Name: Barry C. Robinson
-----------------
Title: Vice President
--------------
<PAGE>
-23-
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the Special Approval
Provision of the foregoing Amendment:
NORWEST BANK COLORADO,
NATIONAL ASSOCIATION
By: /s/ SANDRA A. SAUER
-------------------
Name: Sandra A. Sauer
---------------
Title: Vice President Norwest Bank
---------------------------
Colorado, N.A. - Denver
-----------------------
The undersigned Lender hereby consents and agrees to the Majority
Approval Provisions of the foregoing Amendment:
NORWEST BANK COLORADO,
NATIONAL ASSOCIATION
By: /s/ SANDRA A. SAUER
-------------------
Name: Sandra A. Sauer
---------------
Title: Vice President Norwest Bank
---------------------------
Colorado, N.A. - Denver
------------------------
<PAGE>
-24-
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the Special Approval
Provision of the foregoing Amendment:
UNION BANK OF CALIFORNIA, N.A.
(AS SUCCESSOR BY MERGER TO UNION BANK)
By: /s/ SEAN M. SPRING
------------------
Name: Sean M. Spring
--------------
Title: A.V.P.
------
The undersigned Lender hereby consents and agrees to the Majority
Approval Provisions of the foregoing Amendment:
UNION BANK OF CALIFORNIA, N.A.
(AS SUCCESSOR BY MERGER TO UNION BANK)
By: /s/ SEAN M. SPRING
------------------
Name: Sean M. Spring
--------------
Title: A.V.P.
------
<PAGE>
-25-
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the Special Approval
Provision of the foregoing Amendment:
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By: /s/ JEFFREY W. MAILLET
----------------------
Name: Jeffrey W. Maillet
------------------
Title: Senior Vice President & Director
-------------------------------- -
The undersigned Lender hereby consents and agrees to the Majority
Approval Provisions of the foregoing Amendment:
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By:
Name:
Title:
<PAGE>
-26-
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the Special Approval
Provision of the foregoing Amendment:
BANK ONE, COLORADO, N.A.
By: /s/ T. J. KERN
--------------
Name: T. J. Kern
----------
Title: Vice President
--------------
The undersigned Lender hereby consents and agrees to the Majority
Approval Provisions of the foregoing Amendment:
BANK ONE, COLORADO, N.A.
By: /s/ T. J. KERN
--------------
Name: T. J. Kern
----------
Title: Vice President
--------------
<PAGE>
-27-
Signature Pages for Lenders
---------------------------
The undersigned Lender hereby consents and agrees to the Special Approval
Provision of the foregoing Amendment:
IMPERIAL BANK
By: /s/ RAY VADALMA
---------------
Name: Ray Vadalma
-----------
Title: Senior Vice President
---------------------
The undersigned Lender hereby consents and agrees to the Majority
Approval Provisions of the foregoing Amendment:
IMPERIAL BANK
By: /s/ RAY VADALMA
---------------
Name: Ray Vadalma
-----------
Title: Senior Vice President
---------------------
<PAGE>
EXHIBIT 10.46
NONQUALIFIED
STOCK OPTION AGREEMENT
----------------------
This Agreement, effective as of the 29th day of OCTOBER, 1996, is made
by and between Samsonite Corporation, a Delaware corporation (the "Company"),
and Thomas Sandler (the "Employee").
The Company desires to grant to the Employee a right to acquire shares
of common stock, par value $.01 per share of the Company ("Common Stock"),
according to the terms and conditions provided herein and thereby provide
additional incentives to the Employee to increase the long-term value of the
Company and further align his interests with those of the stockholders of the
Company.
In consideration of the promises and covenants contained in this
Agreement, and other good and valuable consideration, the Company and the
Employee hereby agree as follows:
1. CONFIRMATION OF GRANT OF OPTION. Pursuant to a deterination
-------------------------------
determination by the Compensation Committee of the Board of Directors of the
Company (the "Committee"), on OCTOBER 29, 1996 and pursuant to the Company's
1995 Stock Option and Incentive Award Plan, the Company, subject to the terms
and conditions of this Agree ment, hereby confirms that the Employee has been
granted, effective OCTOBER 29, 1996 (the "Date of Grant"), as a matter of
separate inducement and agreement, and in addition to and not in lieu of salary
or other compensation for services, the right to purchase from the Company an
aggregate of 24,655 shares of Common Stock (the "Options"). The Options shall
vest as provided in Section 4 hereof and shall be subject to adjustment as
provided in Section 6 hereof.
<PAGE>
2. EXERCISE PRICE. The initial exercise price per share
--------------
(the "Exercise Price") for the Options shall be $35.50.
3. NON-TRANSFERABILITY OF OPTIONS. The Options may not be as
-------------------------------
signed, transferred or otherwise disposed of, or pledged or hypothecated
in any way, and shall not be subject to execution, attachment or other process
otherwise than by will or by the laws of descent and distribution. The Options
may be exercised during the lifetime of the Employee only by the Employee.
4. TERM AND EXERCISE OF OPTIONS. The Options shall remain
-----------------------------
outstanding (subject to the vesting and exercisability provisions
provided herein) for a period of six (6) years beginning on the Date of Grant
(the "Option Term"). 33.3% of the Options shall vest on each January 1 in the
years 1997 and 1998, and 33.4% of the Options shall vest on January 1 in 1999,
so long as the Employee remains continually employed by the Company from the
effective date of this Agreement through such date of vesting. Except as
otherwise provided in Section 5 hereof, Options that have vested shall remain
exercisable in whole or in part at any time, and from time to time, until the
earlier to occur of the expiration of the Option Term and the expiration of
ninety (90) days after the date of the termination of the Employee's employment
with the Company. The Employee shall not have any right to dividends or any
other rights of a stockholder of the Company with respect to any shares of
Common Stock underlying the Options until such shares have been issued to him or
her upon the exercise of the Options.
5. TERMINATION. The Employee's rights with respect to
------------
the Options upon termination of his or her employment with the Company or death
are as follows:
(a) Cause. If the Employee is terminated from employment with the
-----
Company for Cause (as defined in the Employment Agreement dated as of May 1,
1995 between Employee and the Company (the "Employment Agreement"), in
accordance with Section 5 (c) of the Employment Agreement then all the Options
(whether vested or un-vested) shall automatically terminate and be canceled
(without any action on the part of the Company) on the date upon which
Preliminary Notice (as described in Section 5(c) of the Employment Agreement) is
given to the Employee, provided that the Employee's employment is thereafter
terminated in accordance with the Employment Agreement.
(b) Disability. If the Employee is terminated from his or her
----------
employment with the Company by reason of disability in accordance with Section
5(b) of the Employment Agreement, then all unvested Options shall automatically
terminate and be canceled (without
2
<PAGE>
any action on the part of the Company) on the effective date of such
termination. All Options that have vested prior to such date shall remain
exercisable until the earlier to occur of (i) the first anniversary of such date
and (ii) the expiration of the Option Term.
(c) Death. If the Employee dies while employed by the Company, then
-----
all un-vested Options shall automatically terminate and be canceled (without any
action on the part of the Company) on the date of death. Following the
Employee's death, his executors, administrators, legatees or distributees may
exercise the Options that have vested prior to the date of death until the
earlier to occur of (i) the first anniversary of such date and (ii) the
expiration of the Option Term.
(d) Change of Control. If a Change of Control (as defined below)
-----------------
occurs, any and all unvested options shall vest on the first anniversary of the
date on which such Change of Control occurs, provided that the Employee remains
continually employed by the Company or its subsidiaries from the date hereof
through such first anniversary date, and all vested options, whether vesting
prior to or upon such date, shall remain exercisable until the earlier to occur
of (i) the ninetieth day following the date of such termination and (ii) the
expiration of the Option Term. Change of Control means (i) any sale, transfer
or other conveyance (whether directly, or through a merger, consolidation or
similar transaction), or series of related sales, transfers, or other
conveyances, of the outstanding capital stock of the Company pursuant to which
any person (or group of affiliated persons) other than an Excluded Person,
becomes the beneficial owner of more than 50% of the outstanding Common Stock or
(ii) any sale, transfer or other conveyance of all or substantially all of the
Company assets to any person (or group of affiliated persons) other than to an
Excluded Person. For the purposes of the foregoing definition, "Excluded
Person" means and includes (A) Apollo Investment Fund, L.P. ("Apollo"), any of
its affiliates, and, so long as Apollo or an affiliate of Apollo controls the
right to vote the securities in question, any partner, shareholder or trustee of
any of them, (B) any corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company and (C) the Company or any subsidiary of the
Company.
(e) Other Terminations of Employment.
--------------------------------
(i) If the Employee's employment is terminated by the Employee other
than for Good Reason (as defined in the Employment Agreement), then all unvested
Options shall automatically terminate and be canceled (without any action on the
part of the Company) on the date of such termination. All Options that have
vested prior to such date shall remain exercisable until the earlier to occur of
(i) the ninetieth day following such date and (ii) the expiration of the Option
Term.
3
<PAGE>
(ii) If the Employee's employment is terminated (A) other than for a
reason described in paragraphs (a) (b) or (c), above or (B) by the Employee
validly for Good Reason, then, as of the date of such termination, all the
Options that have not become vested prior to the date of termination shall
become vested as of such date.
(f) Termination Date. For purposes of Sections 5(a), (b), (d), (e)
----------------
and (f) hereof, the date of termination of the Employee's employment shall be
the Date of Termination (as defined in the Employment Agreement).
(g) Extension After Certain Terminations. If the Employee's
------------------------------------
employment with the Company is terminated other for a reason described in
paragraph (a), (b), (c), (d) or (e) (i) above, and the Employee dies or becomes
disabled within ninety (90) days after such termination of employment, then the
Employee's executors, administrators, legatees or distributees may exercise the
Options, to the extent vested and exercisable as of the date of such
termination, until the earlier to occur of (i) the first anniversary of the date
of death or disability and (ii) the expiration of the Option Term.
6. CERTAIN ADJUSTMENTS. The number and kind of
--------------------
securities that may be purchased upon the exercise of the Options and the
Exercise Price shall be subject to ad justment from time to time upon the
occurrence of any of the following events after the date hereof:
(a) Recapitalization, Capital Reorganization, Reclassification,
-----------------------------------------------------------
Consolidation, Merger or Sale. In case of any recapitalization or capital
- -----------------------------
reorganization of the Company or any reclassification of the outstanding Common
Stock (other than a change in par value, or from par value to no par value, or
from no par value to par value or as a result of a subdivision or combination),
or in case of any consolidation or merger of the Company with or into another
corporation (other than a merger with another corporation in which the Company
is the surviving corporation and that does not result in any reclassifi cation
of or change in the outstanding Common Stock (other than a change in par value,
or from par value to no par value, or from no par value to par value, or as a
result of a subdivi sion or combination), or in case of any sale or transfer to
another corporation of the property of the Company as an entirety or
substantially as an entirety, the Employee shall thereafter have the right to
acquire upon exercise of the Options, in lieu of each share of Common Stock
theretofore issuable upon exercise of the Options, the kind and amount of shares
of capital stock, other securities, money and/or property receivable in respect
of each share of Common Stock upon such recapitalization, reorganization,
reclassification, consolidation, merger, sale or transfer. The provisions of
this paragraph (a) shall similarly apply to succes-
4
<PAGE>
sive recapitalizations, reorganizations, reclassifications, consolidations,
mergers, sales and transfers.
(b) Subdivision or Combination of Shares. If the Company shall
------------------------------------
subdivide or combine its outstanding shares of Common Stock, (i) in case of
subdivision of shares, the Exercise Price shall be proportionately reduced (as
of the effective date of such subdivision, or, if the Company shall take a
record of holders of its Common Stock for the purpose of so subdividing, as of
the applicable record date, whichever is earlier) to reflect the increase in the
total number of shares of Common Stock outstanding as a result of such
subdivision, or (ii) in the case of a combination of shares, the Exercise Price
shall be proportionately increased (as of the effective date of such combination
or, if the Company shall take a record of holders of its Common Stock for the
purpose of so combining, as of the applicable record date, whichever is earlier)
to reflect the reduction in the total number of shares of Common Stock
outstanding as a result of such combination. In the event that an adjustment
pursuant to this paragraph (b) is made as of the record date for purposes of any
subdivision or combi nation and such subdivision or combination is not so made,
the Exercise Price shall again be adjusted to be the Exercise Price that would
then be in effect if such record date had not been fixed.
(c) Certain Dividends and Distributions. If the Company shall pay a
-----------------------------------
dividend on, or make any other distribution to the holders of, its outstanding
Common Stock in shares of its Common Stock, the Exercise Price shall be
adjusted, as of the date the Company shall take a record of the holders of
Common Stock for the purpose of receiving such dividend or other distribution
(or if no such record is taken, as of the date of such payment or other
distribution), to that price determined by multiplying the Exercise Price in
effect immediately prior to such record date (or if no such record is taken,
immediately prior to such payment or other distribution), by a fraction (i) the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution, and (ii) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution; provided, that if
--------
the foregoing adjustment is made to the Exercise Price as of a record date for
such dividend or other distribution and such dividend or distribution is not so
paid or made, the Exercise Price shall again be adjusted to be the Exercise
Price that would then be in effect if such record date had not been fixed.
(d) Adjustment of Number of Shares. Upon each adjustment and
------------------------------
readjustment of the Exercise Price pursuant to paragraph (b) or (c) of this
Section 6, the number of shares of Common Stock then issuable upon exercise of
the Options shall be adjusted, to the nearest 1/10th of a whole share, to the
product obtained by multiplying such
5
<PAGE>
number of shares issuable upon exercise of the Options immediately prior to such
adjustment in the Exercise Price by a fraction, the numerator of which shall be
the Exercise Price imme diately prior to such adjustment, and the denominator of
which shall be the Exercise Price immediately thereafter.
7. METHOD OF EXERCISE OF OPTIONS. (a) Subject to the
------------------------------
terms and conditions of this Agreement, the Options shall be exercisable by
notice (an "Exercise No tice") and payment to the Company in accordance with
the procedure set forth herein; provided, that the aggregate Exercise Price
--------
with respect to any one such exercise shall not be less than $10,000, unless
such exercise represents an exercise of all Options that are vested and
exercisable as of the date of such exercise. Partial shares may not be
exercised. If the Employee fails to accept delivery of and pay for all or any
part of the number of shares specified in the Exercise Notice upon tender or
delivery thereof, his or her right to exercise the Options with respect to such
undelivered shares may be terminated, in the sole discretion of the Committee.
(b) Each Exercise Notice shall: (i) state the number of shares in
respect of which the Options are being exercised, (ii) be accompanied by payment
as provided in paragraph (c) below, and (iii) be signed by the person or persons
entitled to exercise such Options. If such Options are being exercised by any
person or persons other than the Employee, the Exercise Notice shall be
accompanied by proof, satisfactory to the Company and its counsel, of the right
of such person or persons to exercise such Options.
(c) Subject to Section 11 hereof, payment of the Exercise Price and
estimated taxes and fees shall be made by delivering to the Company any one, or
a combination of, the following: (i) a certified or bank cashier's check payable
to the Company or its order, or a wire transfer directly to an account specified
by the Company, (ii) one or more certificates evidencing shares of Common Stock
owned by the Employee immediately prior to such exercise, together with a duly
executed stock power, having an aggregate Fair Market Value (as defined below)
on the date on which the Exercise Notice is given equal to the aggregate
Exercise Price and estimated taxes and fees or (iii) a copy of irrevocable
instructions to a registered broker/dealer to deliver promptly to the Company an
amount of proceeds from the sale of shares of Common Stock to be issued pursuant
to the Options being exercised or of a loan made with respect to shares of
Common Stock to be issued pursuant to the Options being exercised sufficient, in
either case, to pay the Exercise Price ("Cashless Exercise"). All exercise
instructions must be submitted by the Employee on designated company forms or
through designated Company computer programs (Company intranet processes).
(d) The certificate or certificates representing shares of Common
Stock to be
6
<PAGE>
issued upon exercise of the Options shall be registered in the name
of the person or persons exercising such Options (or, if such Options are
exercised by the Employee and if the Em ployee so requests in the applicable
Exercise Notice, shall be registered in the name of the Employee and his or her
spouse jointly, with right of survivorship) but only upon compliance with all
the provisions of this Agreement, and such certificate(s) shall be delivered
within 10 days after receipt of payment and completion of such compliance by the
Employee; provided, that in the case of clause (iii) of the first sentence of
--------
Section 7(c), the Company shall not be required to make delivery of the
certificate(s) until payment is actually received from such broker/dealer.
(e) The Company shall have no obligation to issue or deliver
fractional shares of Common Stock upon exercise of the Options but may, in its
sole discretion, elect to do so. In lieu of issuing any such fractional share,
the Company shall pay to the person exercising the Options, promptly following
such exercise, an amount in cash equal to the Fair Market Value of such fraction
of a share on the date of exercise. The "Fair Market Value" per share of Common
Stock as of any date of determination, shall mean (i) the closing sales price
per share of Common Stock on the national securities exchange on which such
stock is principally traded, on the next preceding date on which there was a
sale of such stock on such exchange, or (ii) if the shares of Common Stock are
not listed or admitted to trading on any such exchange, the closing price as
reported by the NASDAQ Stock Market for the last preceding date on which there
was a sale of such stock on such exchange, or (iii) if the shares of Common
Stock are not then listed on a national securities exchange or on the NASDAQ
Stock Market, the average of the highest reported bid and lowest reported asked
prices for the shares of Common Stock as reported by the National Association of
Securities Dealers, Inc. Automated Quotations ("NASDAQ") system for the last
preceding date on which such bid and asked prices were reported, or (iv) if the
shares of Common Stock are not then listed on any securities exchange or prices
therefor are not then quoted in the NASDAQ system, such value as determined in
good faith by the Board (or any duly authorized committee thereof).
8. NO RIGHT TO CONTINUED EMPLOYMENT. Nothing in this
---------------------------------
Agreement shall confer upon the Employee the right to continue in the employ of
the Company or to be entitled to any right or benefit not set forth in this
Agreement or to interfere with or limit in any way the right of the Company to
terminate the Employee's employment.
9. WITHHOLDING TAXES. The Company shall have the right
------------------
to require the Employee (or such other person, if any, who has the right to
exercise the Options) to pay to the Company in cash the amount of any federal,
state, local and foreign income and other taxes that the Company may be required
to withhold before delivering to the Employee (or
7
<PAGE>
such other person) a certificate or certificates representing shares of Common
Stock issuable hereunder.
10. APPROVAL OF COUNSEL. Any exercise of the Options
-------------------
and the issuance and delivery of shares of Common Stock pursuant thereto shall
be subject to approval, by the Company's counsel, of all legal matters in
connection therewith, including compliance with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder, the
requirements of any stock exchange upon which the Common Stock may then be
listed and any applicable state securities or "blue sky" laws. The Employee
understands that, as of the date hereof, neither the Options nor the shares of
Common Stock issuable upon exercise of the Options have been registered under
the Securities Act or any applicable state securities or "blue sky" laws.
11. REGISTRATION RIGHTS. If the Company proposes to
-------------------
file a registration statement on Form S-8 (or any successor form for the
registration under the Securities Act of securities to be offered pursuant to
employee benefit plans) and such form then permits the registration thereunder
of the Common Stock underlying the Options, the Company shall include in such
registration the Common Stock underlying the Option, subject to then applicable
rules and regulations, in order to permit the public resale thereof by the
Employee. The registration rights set forth in this Section 12 shall apply only
to the extent that an effec tive registration statement is then required for
the public sale by the Employee of the Common Stock underlying the Options.
12. NON-COMPETITION. Employee agrees that during
----------------
employment with the Company, and for a period of one year thereafter, Employee
shall not, directly or indirectly, as a principal, officer, director, employee,
or in any other capacity whatsoever, without prior written consent of the
Company, engage in any activity with, or provide services to, any person or
entity engaged in, or about to engage in, any business activity that is
competitive with the business then engaged in by Samsonite, in the geographic
areas within which Employee's work has been concerned during the twelve months
preceding the termination Employee's employment with the Company.
However, nothing in this Agreement shall prevent Employee from making
or holding any investment in any amount in securities of a competitive business
traded on a national securities exchange or traded in the over the counter
market, provided said investments do not exceed one percent (1%) of the issued
and outstanding stock of any such competitive business.
8
<PAGE>
Employee acknowledges and agrees that (1) breach of this Section 12 is
appropriately remedied by injunctive relief, including interim or temporary
relief, and Employee hereby consents thereto; and (2) the Company may refuse to
allow the exercise of any otherwise vested Options in the event of an alleged
breach by Employee of this Section 12, and such Options shall be terminated and
canceled upon determination of such breach; and (3) the Company is not liable
for the gain or loss by the Employee due to the increase or decrease of the Fair
Market Value of the Company stock during the period in which the Company may
have refused to accept exercise instructions pending final determination of the
Employee's breach of this Agreement.
13. NOTICES. For the purposes of this Agreement, notices,
-------
demands and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given (i) when hand delivered,
(ii) when sent, if sent by overnight mail, over night courier or facsimile
transmission or (iii) (unless otherwise specified) when mailed by
United States registered mail, return receipt requested, postage prepaid,
addressed as follows:
Samsonite Corporation
11200 East Forty-Fifth Avenue
Denver, Colorado 80239-3018
c/o Chief Administrative Officer & Secretary
with a copy to each member of the Compensation Committee who is not an officer
or an em ployee of the Company, at the Company's address, or to such other
address as any party may have furnished to the others in writing in accordance
herewith, except that notices of change of address shall be effective only upon
receipt.
All notices to the Employee or other person or persons then
entitled to exercise the Options shall be addressed to the Employee or such
other person or persons at the then current address of the Employee contained in
the employee payroll records of the Company.
Anyone to whom a notice may be given under this Agreement
may designate a new address by notice to that effect.
14. BENEFITS OF AGREEMENT. This Agreement shall inure
----------------------
to the benefit of and be binding upon each successor and assign of the Company.
All obligations imposed upon the Employee and all rights granted to the Company
under this Agreement shall be binding upon the Employee and, to the limited
extent set forth herein, the Employee's heirs, legal representatives and
successors. No other person shall have any rights under this Agreement.
9
<PAGE>
15. SEVERABILITY. If any one or more provisions of this
-------------
Agreement is deemed to be illegal or unenforceable, such illegality or un-
enforceability shall not affect the validity or enforceability of the remaining
legal and enforceable provisions herein, which shall be construed as if such
illegal or unenforceable provision or provisions had not been inserted.
16. ENTIRE AGREEMENT. This Agreement contains the
-----------------
entire understand ing and agreement between the parties hereto, and supersedes
all prior understandings and agreements between them respecting the subject
matter hereof. The provisions of this Agree ment may not be modified, waived
nor discharged unless such waiver, modification or dis charge is agreed to in
writing, signed by the parties hereto.
17. WAIVER. No waiver by either party hereto, at any
-------
time, of any breach by the other party of, or compliance with, any condition or
provision of this Agreement to be performed by such other party, shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time.
18. GOVERNING LAW. This Agreement shall be construed
-------------
and governed in accordance with the laws of the State of New York, without
regard to the conflicts of law principles thereof.
19. INCORPORATION BY REFERENCE. The incorporation
---------------------------
herein of any terms, by reference to another document, shall not be affected by
the termination of any agreement contained in such other document, nor by the
invalidity of any provision thereof.
20. TIME PERIODS. Any action required to be taken under
-------------
this Agreement within a certain number of days shall be taken within that number
of calendar days; provided, that if the last day for taking such action falls on
--------
a weekend or a holiday, the period during which such action may be taken shall
be automatically extended to the next business day.
21. COUNTERPARTS. This Agreement may be executed in
-------------
counterparts, each of which shall be deemed to be an original, but both of which
together shall constitute one and the same instrument.
22. MISCELLANEOUS. Employee agrees to abide by the laws
--------------
and regulations governing Insider Trading, the terms of this Stock Option
Agreement, and the policies and decisions of the management of the Company in
all matters concerning this stock option grant of October 29, 1996, and
acknowledges receipt of the following documents:
Received Documents:
a. Stock Option Agreement
10
<PAGE>
b. Stock Option Questions & Answers
c. Avoiding Insider Trading Brochure
UNDERSTOOD AND AGREED TO:
Employee:
/s/ THOMAS R. SANDLER
- ----------------------------------------------------------------
(Signature)
SAMSONITE CORPORATION
By: /s/ JOHN MURTAGH
-------------------------------------------------------------
Name: John Murtagh
Title: Chief Administrative Officer & Secretary
11
<PAGE>
EXHIBIT 10.47
NONQUALIFIED
STOCK OPTION AGREEMENT
----------------------
This Agreement, effective as of the 29th day of OCTOBER,
1996, is made by and between Samsonite Corporation, a Delaware corporation (the
"Company"), and Karlheinz Tretter (the "Employee").
The Company desires to grant to the Employee a right to acquire shares
of common stock, par value $.01 per share of the Company ("Common Stock"),
according to the terms and conditions provided herein and thereby provide
additional incentives to the Employee to increase the long-term value of the
Company and further align his interests with those of the stockholders of the
Company.
In consideration of the promises and covenants contained in this
Agreement, and other good and valuable consideration, the Company and the
Employee hereby agree as follows:
1. CONFIRMATION OF GRANT OF OPTION. Pursuant to a
--------------------------------
determination by the Compensation Committee of the Board of Directors of the
Company (the "Committee"), on OCTOBER 29, 1996 and pursuant to the Company's
1995 Stock Option and Incentive Award Plan, the Company, subject to the terms
and conditions of this Agree ment, hereby confirms that the Employee has been
granted, effective OCTOBER 29, 1996 (the "Date of Grant"), as a matter of
separate inducement and agreement, and in addition to and not in lieu of salary
or other compensation for services, the right to purchase from the Company an
aggregate of 50,000 shares of Common Stock (the "Options"). The Options shall
vest as provided in Section 4 hereof and shall be subject to adjustment as
provided in Section 6 hereof.
<PAGE>
2. EXERCISE PRICE. The initial exercise price per
---------------
share (the "Exercise Price") for the Options shall be $35.50.
3. NON-TRANSFERABILITY OF OPTIONS. The Options may not
-------------------------------
be as signed, transferred or otherwise disposed of, or pledged or hypothecated
in any way, and shall not be subject to execution, attachment or other process
otherwise than by will or by the laws of descent and distribution. The Options
may be exercised during the lifetime of the Employee only by the Employee.
4. TERM AND EXERCISE OF OPTIONS. The Options shall
-----------------------------
remain outstanding (subject to the vesting and exercisability provisions
provided herein) for a period of six (6) years beginning on the Date of Grant
(the "Option Term"). 33.3% of the Options shall vest on each January 1 in the
years 1997 and 1998, and 33.4% of the Options shall vest on January 1 in 1999,
so long as the Employee remains continually employed by the Company from the
effective date of this Agreement through such date of vesting. Except as
otherwise provided in Section 5 hereof, Options that have vested shall remain
exercisable in whole or in part at any time, and from time to time, until the
earlier to occur of the expiration of the Option Term and the expiration of
ninety (90) days after the date of the termination of the Employee's employment
with the Company. The Employee shall not have any right to dividends or any
other rights of a stockholder of the Company with respect to any shares of
Common Stock underlying the Options until such shares have been issued to him or
her upon the exercise of the Options.
5. TERMINATION. The Employee's rights with respect to
------------
the Options upon termination of his or her employment with the Company or death
are as follows:
(a) Cause. If the Employee is terminated from employment with the
-----
Company for Cause (as defined below), then all the Options (whether vested or
un-vested) shall automatically terminate and be canceled (without any action on
the part of the Company) on the date upon which Preliminary Notice (as
described below) is given to the Employee, provided that the Employee's
employment is thereafter terminated.
For purposes of this Agreement, the Company shall have "Cause" to
terminate the Employee's employment upon (A) the engaging by the Employee in
willful misconduct that is materially injurious to the Company, (B) the
embezzlement or misappropriation of funds or property of the Company or its
subsidiaries by the Employee or the conviction of the Employee of a felony or
the entrance of a plea of guilty, or nolo contendere by the Employee to a felony
or (C) the failure or refusal by the Employee to devote his full business
2
<PAGE>
time and attention to the performance of his duties and responsibilities in
connection with his employment or any other breach by the Employee of the terms
of his employment in any material respect if such breach has not been cured by
the Employee within thirty (30) days after the Preliminary Notice has been given
to the Employee. For purposes of this paragraph, no act, or failure to act, on
the Employee's part shall be considered "willful" unless done, or omitted to be
done, by him not in good faith and without reasonable belief that his action or
omission was in the best interest of the Company. The Employee shall not be
deemed to have been terminated for Cause unless the Company shall have given the
Employee (i) notice (the "Preliminary Notice") setting forth, in reasonable
detail the facts and circumstances claimed to provide a basis for termination
for Cause, (ii) a reasonable opportunity for the Employee, together with his
counsel, to be heard before the Committee and (iii) a notice of termination
stating that, in the good faith judgement of the Committee, the Employee was
guilty of conduct set forth in clauses (A), (B), or (C) above, and specifying
the particulars thereof in reasonable detail. Upon receipt of the Preliminary
Notice, the Employee shall have thirty (30) days in which to appear before the
Committee with counsel, or take such other action as he may deem appropriate,
and such thirty (30) day period is hereby agreed to as a reasonable opportunity
for the Employee to be heard.
(b) Disability. If the Employee is terminated from his or her
----------
employment with the Company by reason of disability (as defined below), then all
unvested Options shall auto matically terminate and be canceled (without any
action on the part of the Company) on the effective date of such termination.
All Options that have vested prior to such date shall remain exercisable until
the earlier to occur of (i) the first anniversary of such date and (ii) the
expiration of the Option Term.
For purposes of this Agreement, "disability" shall mean that the
Company determines in good faith, based upon medical evidence acceptable to it,
that the Employee has become physically or mentally disabled or incapacitated
for a continuous period of ninety (90) days to such an extent that he is unable
to perform the essential functions of his job.
(c) Death. If the Employee dies while employed by the Company, then
-----
all un-vested Options shall automatically terminate and be canceled (without any
action on the part of the Company) on the date of death. Following the
Employee's death, his executors, administrators, legatees or distributees may
exercise the Options that have vested prior to the date of death until the
earlier to occur of (i) the first anniversary of such date and (ii) the
expiration of the Option Term.
(d) Change of Control. If the Employee is terminated after a Change
-----------------
of Control (as defined below) has occurred for any reason other than for Cause
as defined
3
<PAGE>
herein, or for failure to perform his or her duties and responsibilities at the
level reasonably expected for the Employee's position, and consistent with
expectations applied to the Employee prior to the Change of Control, any and all
unvested options shall immediately vest, and all vested options, whether vesting
prior to or upon such date, shall remain exercisable until the earlier to occur
of (i) the ninetieth day following the date of such termination and (ii) the
expiration of the Option Term. Change of Control means (i) any sale, transfer or
other conveyance (whether directly, or through a merger, consolidation or
similar transaction), or series of related sales, transfers, or other
conveyances, of the outstanding capital stock of the Company pursuant to which
any person (or group of affiliated persons) other than an Excluded Person,
becomes the beneficial owner of more than 50% of the outstanding Common Stock or
(ii) any sale, transfer or other conveyance of all or substantially all of the
Company assets to any person (or group of affiliated persons) other than to an
Excluded Person. For the purposes of the foregoing definition, "Excluded Person"
means and includes (A) Apollo Investment Fund, L.P. ("Apollo"), any of its
affiliates, and, so long as Apollo or an affiliate of Apollo controls the right
to vote the securities in question, any partner, shareholder or trustee of any
of them, (B) any corporation owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as their ownership of stock
of the Company and (C) the Company or any subsidiary of the Company.
(e) Other Terminations of Employment.
--------------------------------
(i) If the Employee's employment is terminated by the Employee
other than for Good Reason (as defined below), then all unvested Options shall
automatically terminate and be canceled (without any action on the part of the
Company) on the date of such termination. All Options that have vested prior to
such date shall remain exercisable until the earlier to occur of (i) the
ninetieth day following such date and (ii) the expiration of the Option Term.
For purposes of this Agreement, "Good Reason" shall mean, so long as
the Employee has not been guilty of the conduct set forth in clauses (A), (B) or
(C) of the definition of Cause in Section 5(a) hereof, (i) a failure by the
Company to comply with any material term of the Employee's employment that has
not been cured within thirty (30) days after written notice of such
noncompliance has been given by the Employee to the Company or (ii) the
assignment to the Employee by the Company of duties inconsistent with the
Employee's position, duties or responsibilities including, but not limited to,
any material reduction in such position, duties or responsibilities or material
change in his title without the consent of the Employee.
(ii) If the Employee's employment is terminated (A) by the Company
without
4
<PAGE>
Cause other than for disability or (B) by the Employee for Good Reason, then, as
of the date of such termination, all the Options that have not become vested
prior to the date of termination shall become vested as of such date.
(f) Extension After Certain Terminations. If the Employee's
------------------------------------
employment with the Company is terminated other than for a reason described in
paragraph (a), (b), (c) or (d) above, and the Employee dies or becomes disabled
within ninety (90) days after such termi nation of employment, then the
Employee's executors, administrators, legatees or distributees may exercise the
Options, to the extent vested and exercisable as of the date of such termina
tion, until the earlier to occur of (i) the first anniversary of the date of
death or disability and (ii) the expiration of the Option Term.
6. CERTAIN ADJUSTMENTS. The number and kind of
--------------------
securities that may be purchased upon the exercise of the Options and the
Exercise Price shall be subject to ad justment from time to time upon the
occurrence of any of the following events after the date hereof:
(a) Recapitalization, Capital Reorganization, Reclassification,
-----------------------------------------------------------
Consolidation, Merger or Sale. In case of any recapitalization or capital
- -----------------------------
reorganization of the Company or any reclassification of the outstanding Common
Stock (other than a change in par value, or from par value to no par value, or
from no par value to par value or as a result of a subdivision or combination),
or in case of any consolidation or merger of the Company with or into another
corporation (other than a merger with another corporation in which the Company
is the surviving corporation and that does not result in any reclassifi cation
of or change in the outstanding Common Stock (other than a change in par value,
or from par value to no par value, or from no par value to par value, or as a
result of a subdivi sion or combination), or in case of any sale or transfer to
another corporation of the property of the Company as an entirety or
substantially as an entirety, the Employee shall thereafter have the right to
acquire upon exercise of the Options, in lieu of each share of Common Stock
theretofore issuable upon exercise of the Options, the kind and amount of shares
of capital stock, other securities, money and/or property receivable in respect
of each share of Common Stock upon such recapitalization, reorganization,
reclassification, consolidation, merger, sale or transfer. The provisions of
this paragraph (a) shall similarly apply to succes sive recapitalizations,
reorganizations, reclassifications, consolidations, mergers, sales and
transfers.
(b) Subdivision or Combination of Shares. If the Company shall
------------------------------------
subdivide or combine its outstanding shares of Common Stock, (i) in case of
subdivision of shares, the Exercise Price shall be proportionately reduced (as
of the effective date of such subdivision,
5
<PAGE>
or, if the Company shall take a record of holders of its Common Stock for the
purpose of so subdividing, as of the applicable record date, whichever is
earlier) to reflect the increase in the total number of shares of Common Stock
outstanding as a result of such subdivision, or (ii) in the case of a
combination of shares, the Exercise Price shall be proportionately increased (as
of the effective date of such combination or, if the Company shall take a record
of holders of its Common Stock for the purpose of so combining, as of the
applicable record date, whichever is earlier) to reflect the reduction in the
total number of shares of Common Stock outstanding as a result of such
combination. In the event that an adjustment pursuant to this paragraph (b) is
made as of the record date for purposes of any subdivision or combi nation and
such subdivision or combination is not so made, the Exercise Price shall again
be adjusted to be the Exercise Price that would then be in effect if such record
date had not been fixed.
(c) Certain Dividends and Distributions. If the Company shall pay a
-----------------------------------
dividend on, or make any other distribution to the holders of, its outstanding
Common Stock in shares of its Common Stock, the Exercise Price shall be
adjusted, as of the date the Company shall take a record of the holders of
Common Stock for the purpose of receiving such dividend or other distribution
(or if no such record is taken, as of the date of such payment or other
distribution), to that price determined by multiplying the Exercise Price in
effect immediately prior to such record date (or if no such record is taken,
immediately prior to such payment or other distribution), by a fraction (i) the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution, and (ii) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution; provided, that if
--------
the foregoing adjustment is made to the Exercise Price as of a record date for
such dividend or other distribution and such dividend or distribution is not so
paid or made, the Exercise Price shall again be adjusted to be the Exercise
Price that would then be in effect if such record date had not been fixed.
(d) Adjustment of Number of Shares. Upon each adjustment and
------------------------------
readjustment of the Exercise Price pursuant to paragraph (b) or (c) of this
Section 6, the number of shares of Common Stock then issuable upon exercise of
the Options shall be adjusted, to the nearest 1/10th of a whole share, to the
product obtained by multiplying such number of shares issuable upon exercise of
the Options immediately prior to such adjustment in the Exercise Price by a
fraction, the numerator of which shall be the Exercise Price imme diately prior
to such adjustment, and the denominator of which shall be the Exercise Price
immediately thereafter.
7. METHOD OF EXERCISE OF OPTIONS. (a) Subject to the
------------------------------
terms and
6
<PAGE>
conditions of this Agreement, the Options shall be exercisable by notice (an
"Exercise No tice") and payment to the Company in accordance with the procedure
set forth herein; provided, that the aggregate Exercise Price with respect to
--------
any one such exercise shall not be less than $10,000, unless such
exercise represents an exercise of all Options that are vested and exercisable
as of the date of such exercise. Partial shares may not be exercised. If the
Employee fails to accept delivery of and pay for all or any part of the number
of shares specified in the Exercise Notice upon tender or delivery thereof, his
or her right to exercise the Options with respect to such undelivered shares may
be terminated, in the sole discretion of the Committee.
(b) Each Exercise Notice shall: (i) state the number of shares in
respect of which the Options are being exercised, (ii) be accompanied by payment
as provided in paragraph (c) below, and (iii) be signed by the person or persons
entitled to exercise such Options. If such Options are being exercised by any
person or persons other than the Employee, the Exercise Notice shall be
accompanied by proof, satisfactory to the Company and its counsel, of the right
of such person or persons to exercise such Options.
(c) Subject to Section 11 hereof, payment of the Exercise Price and
estimated taxes and fees shall be made by delivering to the Company any one, or
a combination of, the following: (i) a certified or bank cashier's check payable
to the Company or its order, or a wire transfer directly to an account specified
by the Company, (ii) one or more certificates evidencing shares of Common Stock
owned by the Employee immediately prior to such exercise, together with a duly
executed stock power, having an aggregate Fair Market Value (as defined below)
on the date on which the Exercise Notice is given equal to the aggregate
Exercise Price and estimated taxes and fees or (iii) a copy of irrevocable
instructions to a registered broker/dealer to deliver promptly to the Company an
amount of proceeds from the sale of shares of Common Stock to be issued pursuant
to the Options being exercised or of a loan made with respect to shares of
Common Stock to be issued pursuant to the Options being exercised sufficient, in
either case, to pay the Exercise Price ("Cashless Exercise"). All exercise
instructions must be submitted by the Employee on designated company forms or
through designated Company computer programs (Company intranet processes).
(d) The certificate or certificates representing shares of Common
Stock to be issued upon exercise of the Options shall be registered in the name
of the person or persons exercising such Options (or, if such Options are
exercised by the Employee and if the Em ployee so requests in the applicable
Exercise Notice, shall be registered in the name of the Employee and his or her
spouse jointly, with right of survivorship) but only upon compliance with all
the provisions of this Agreement, and such certificate(s) shall be delivered
within 10 days after receipt of payment and completion of such compliance by the
Employee; provided,
--------
7
<PAGE>
that in the case of clause (iii) of the first sentence of Section 7(c), the
Company shall not be required to make delivery of the certificate(s) until
payment is actually received from such broker/dealer.
(e) The Company shall have no obligation to issue or deliver
fractional shares of Common Stock upon exercise of the Options but may, in its
sole discretion, elect to do so. In lieu of issuing any such fractional share,
the Company shall pay to the person exercising the Options, promptly following
such exercise, an amount in cash equal to the Fair Market Value of such fraction
of a share on the date of exercise. The "Fair Market Value" per share of Common
Stock as of any date of determination, shall mean (i) the closing sales price
per share of Common Stock on the national securities exchange on which such
stock is principally traded, on the next preceding date on which there was a
sale of such stock on such exchange, or (ii) if the shares of Common Stock are
not listed or admitted to trading on any such exchange, the closing price as
reported by the NASDAQ Stock Market for the last preceding date on which there
was a sale of such stock on such exchange, or (iii) if the shares of Common
Stock are not then listed on a national securities exchange or on the NASDAQ
Stock Market, the average of the highest reported bid and lowest reported asked
prices for the shares of Common Stock as reported by the National Association of
Securities Dealers, Inc. Automated Quotations ("NASDAQ") system for the last
preceding date on which such bid and asked prices were reported, or (iv) if the
shares of Common Stock are not then listed on any securities exchange or prices
therefor are not then quoted in the NASDAQ system, such value as determined in
good faith by the Board (or any duly authorized committee thereof).
8. NO RIGHT TO CONTINUED EMPLOYMENT. Nothing in this
---------------------------------
Agreement shall confer upon the Employee the right to continue in the employ of
the Company or to be entitled to any right or benefit not set forth in this
Agreement or to interfere with or limit in any way the right of the Company to
terminate the Employee's employment.
9. WITHHOLDING TAXES. The Company shall have the right
------------------
to require the Employee (or such other person, if any, who has the right to
exercise the Options) to pay to the Company in cash the amount of any federal,
state, local and foreign income and other taxes that the Company may be required
to withhold before delivering to the Employee (or such other person) a
certificate or certificates representing shares of Common Stock issuable
hereunder.
10. APPROVAL OF COUNSEL. Any exercise of the Options
-------------------
and the issuance and delivery of shares of Common Stock pursuant thereto shall
be subject to approval, by the Company's counsel, of all legal matters in
connection therewith, including compliance with
8
<PAGE>
the requirements of the Securities Act of 1933, as amended (the "Securities
Act"), and the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder, the requirements of any stock exchange upon which the
Common Stock may then be listed and any applicable state securities or "blue
sky" laws. The Employee understands that, as of the date hereof, neither the
Options nor the shares of Common Stock issuable upon exercise of the Options
have been registered under the Securities Act or any applicable state securities
or "blue sky" laws.
11. REGISTRATION RIGHTS. If the Company proposes to
-------------------
file a registration statement on Form S-8 (or any successor form for the
registration under the Securities Act of securities to be offered pursuant to
employee benefit plans) and such form then permits the registration thereunder
of the Common Stock underlying the Options, the Company shall include in such
registration the Common Stock underlying the Option, subject to then applicable
rules and regulations, in order to permit the public resale thereof by the
Employee. The registration rights set forth in this Section 12 shall apply only
to the extent that an effec tive registration statement is then required for the
public sale by the Employee of the Common Stock underlying the Options.
12. NON-COMPETITION. Employee agrees that during
----------------
employment with the Company, and for a period of one year thereafter, Employee
shall not, directly or indirectly, as a principal, officer, director, employee,
or in any other capacity whatsoever, without prior written consent of the
Company, engage in any activity with, or provide services to, any person or
entity engaged in, or about to engage in, any business activity that is
competitive with the business then engaged in by Samsonite, in the geographic
areas within which Employee's work has been concerned during the twelve months
preceding the termination Employee's employment with the Company.
However, nothing in this Agreement shall prevent Employee from making
or holding any investment in any amount in securities of a competitive business
traded on a national securities exchange or traded in the over the counter
market, provided said investments do not exceed one percent (1%) of the issued
and outstanding stock of any such competitive business.
Employee acknowledges and agrees that (1) breach of this Section 12 is
appropriately remedied by injunctive relief, including interim or temporary
relief, and Employee hereby consents thereto; and (2) the Company may refuse to
allow the exercise of any otherwise vested Options in the event of an alleged
breach by Employee of this Section 12, and such Options shall be terminated and
canceled upon determination of such breach; and (3) the Company is not liable
for the gain or loss by the Employee due to the
9
<PAGE>
increase or decrease of the Fair Market Value of the Company stock during the
period in which the Company may have refused to accept exercise instructions
pending final determination of the Employee's breach of this Agreement.
13. NOTICES. For the purposes of this Agreement,
-------
notices, demands and all other communications provided for in this Agreement
shall be in writing and shall be deemed to have been duly given (i) when hand
delivered, (ii) when sent, if sent by overnight mail, overnight courier or
facsimile transmission or (iii) (unless otherwise specified) when mailed by
United States registered mail, return receipt requested, postage prepaid,
addressed as follows:
Samsonite Corporation
11200 East Forty-Fifth Avenue
Denver, Colorado 80239-3018
c/o Chief Administrative Officer & Secretary
with a copy to each member of the Compensation Committee who is not an officer
or an em ployee of the Company, at the Company's address, or to such other
address as any party may have furnished to the others in writing in accordance
herewith, except that notices of change of address shall be effective only upon
receipt.
All notices to the Employee or other person or persons then entitled
to exercise the Options shall be addressed to the Employee or such other person
or persons at the then current address of the Employee contained in the employee
payroll records of the Company.
Anyone to whom a notice may be given under this Agreement
may designate a new address by notice to that effect.
14. BENEFITS OF AGREEMENT. This Agreement shall inure
----------------------
to the benefit of and be binding upon each successor and assign of the Company.
All obligations imposed upon the Employee and all rights granted to the Company
under this Agreement shall be binding upon the Employee and, to the limited
extent set forth herein, the Employee's heirs, legal representatives and
successors. No other person shall have any rights under this Agreement.
15. SEVERABILITY. If any one or more provisions of this
-------------
Agreement is deemed to be illegal or unenforceable, such illegality or un-
enforceability shall not affect the validity or enforceability of the remaining
legal and enforceable provisions herein, which shall be construed as if such
illegal or unenforceable provision or provisions had not been
10
<PAGE>
inserted.
16. ENTIRE AGREEMENT. This Agreement contains the
-----------------
entire understand ing and agreement between the parties hereto, and supersedes
all prior understandings and agreements between them respecting the subject
matter hereof. The provisions of this Agree ment may not be modified, waived
nor discharged unless such waiver, modification or dis charge is agreed to in
writing, signed by the parties hereto.
17. WAIVER. No waiver by either party hereto, at any
-------
time, of any breach by the other party of, or compliance with, any condition or
provision of this Agreement to be performed by such other party, shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time.
18. GOVERNING LAW. This Agreement shall be construed
-------------
and governed in accordance with the laws of the State of New York, without
regard to the conflicts of law principles thereof.
19. INCORPORATION BY REFERENCE. The incorporation herein
---------------------------
of any terms, by reference to another document, shall not be affected by the
termination of any agreement contained in such other document, nor by the
invalidity of any provision thereof.
20. TIME PERIODS. Any action required to be taken under
-------------
this Agreement within a certain number of days shall be taken within that number
of calendar days; provided, that if the last day for taking such action falls on
--------
a weekend or a holiday, the period during which such action may be taken shall
be automatically extended to the next business day.
21. COUNTERPARTS. This Agreement may be executed in
-------------
counterparts, each of which shall be deemed to be an original, but both of which
together shall constitute one and the same instrument.
22. MISCELLANEOUS. Employee agrees to abide by the laws
--------------
and regulations governing Insider Trading, the terms of this Stock Option
Agreement, and the policies and decisions of the management of the Company in
all matters concerning this stock option grant of October 29, 1996, and
acknowledges receipt of the following documents:
Received Documents:
a. Stock Option Agreement
b. Stock Option Questions & Answers
11
<PAGE>
c. Avoiding Insider Trading Brochure
UNDERSTOOD AND AGREED TO:
Employee:
/s/ KARLHEINZ TRETTER
- --------------------------------------------------------------
(Signature)
SAMSONITE CORPORATION
By: /s/ JOHN MURTAGH
-------------------------------------------------------------
Name: John Murtagh
Title: Chief Administrative Officer & Secretary
12
<PAGE>
EXHIBIT 10.48
NONQUALIFIED
STOCK OPTION AGREEMENT
----------------------
This Agreement, effective as of the 16th day of JANUARY,
1997, is made by and between Samsonite Corporation, a Delaware corporation (the
"Company"), and Gary Ervick (the "Employee").
The Company desires to grant to the Employee a right to acquire shares
of common stock, par value $.01 per share of the Company ("Common Stock"),
according to the terms and conditions provided herein and thereby provide
additional incentives to the Employee to increase the long-term value of the
Company and further align his interests with those of the stockholders of the
Company.
In consideration of the promises and covenants contained in this
Agreement, and other good and valuable consideration, the Company and the
Employee hereby agree as follows:
1. CONFIRMATION OF GRANT OF OPTION. Pursuant to a
--------------------------------
determination by the Compensation Committee of the Board of Directors of the
Company (the "Committee"), on JANUARY 16, 1997 and pursuant to the Company's
1995 Stock Option and Incentive Award Plan, the Company, subject to the terms
and conditions of this Agree ment, hereby confirms that the Employee has been
granted, effective JANUARY 16, 1997 (the "Date of Grant"), as a matter of
separate inducement and agreement, and in addition to and not in lieu of salary
or other compensation for services, the right to purchase from the Company an
aggregate of 30,000 shares of Common Stock (the "Options"). The Options shall
vest as provided in Section 4 hereof and shall be subject to adjustment as
provided in Section 6 hereof.
<PAGE>
2. EXERCISE PRICE. The initial exercise price per
---------------
share (the "Exercise Price") for the Options shall be $41.50.
3. NON-TRANSFERABILITY OF OPTIONS. The Options may not
-------------------------------
be as signed, transferred or otherwise disposed of, or pledged or hypothecated
in any way, and shall not be subject to execution, attachment or other process
otherwise than by will or by the laws of descent and distribution. The Options
may be exercised during the lifetime of the Employee only by the Employee.
4. TERM AND EXERCISE OF OPTIONS. The Options shall
-----------------------------
remain outstanding (subject to the vesting and exercisability provisions
provided herein) for a period of six (6) years beginning on the Date of Grant
(the "Option Term"). 33.3% of the Options shall vest on each anniversary date
of this Grant in the years 1998 and 1999, and 33.4% of the Options shall vest on
the anniversary date of this Grant in 2000, so long as the Employee remains
continually employed by the Company from the effective date of this Agreement
through such date of vesting. Except as otherwise provided in Section 5 hereof,
Options that have vested shall remain exercisable in whole or in part at any
time, and from time to time, until the earlier to occur of the expiration of the
Option Term and the expiration of ninety (90) days after the date of the
termination of the Employee's employment with the Company. The Employee shall
not have any right to dividends or any other rights of a stockholder of the
Company with respect to any shares of Common Stock underlying the Options until
such shares have been issued to him or her upon the exercise of the Options.
(a) Accelerated Vesting of Options. Notwithstanding any provision
------------------------------
hereof to the contrary, if a Change of Control (as defined below) occurs at any
time prior to the third anniversary of this Agreement, and the Employee
continues to be employed by the Company through the Change of Control Vesting
Date (as defined below), then unvested Options shall become vested on the
earlier of their normal vesting date or the Change of Control Vesting Date.
(b) Certain Definitions. As used in this Agreement, the
-------------------
following terms shall have the following meanings:
"Change of Control Vesting Date." "Change of Control Vesting Date
------------------------------
means the first anniversary of the date on which a Change of Control occurs.
"Change of Control." "Change of Control" means (i) any sale, transfer
-----------------
or other conveyance (whether directly, or indirectly through a merger,
consolidation or similar
2
<PAGE>
transaction), or series of related sales, transfers or other conveyances, of the
outstanding capital stock of the Company pursuant to which any person (or group
of affiliated persons) other than an Excluded Person, becomes the beneficial
owner of more than 50% of the outstanding Common Stock or (ii) any sale,
transferor other conveyance of all or substantially all of the Company's assets
to any person (or group of affiliated persons) other than to an Excluded Person.
For purposes of the foregoing definition, "Excluded Person" means and includes
(A) Apollo Investment Fund, L.P. ("Apollo"), any of its affiliates, and, so long
as Apollo or an affiliate of Apollo controls the right to vote the securities in
question, any partner, shareholder or trustee of any of them, (B) any
corporation owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company
and (C) the Company or any subsidiary of the Company.
5. TERMINATION. The Employee's rights with respect to
------------
the Options upon termination of his or her employment with the Company or death
are as follows:
(a) Cause. If the Employee is terminated from employment with the
-----
Company for Cause (as defined in the Employment Agreement dated September 10,
1996 between the Employee and the Company (the "Employment Agreement"), then all
the Options (whether vested or un-vested) shall automatically terminate and be
canceled (without any action on the part of the Company) on the date upon which
Preliminary Notice is given in accordance with Section 5(c) of the Employment
Agreement, provided that the Employee's employment is thereafter terminated.
(b) Disability. If a Change of Control has not occurred and the
----------
Employee is terminated from his or her employment with the Company by reason of
disability in accordance with Section 5(b) of the Employment Agreement, then all
unvested Options shall automatically terminate and be canceled (without any
action on the part of the Company) on the effective date of such termination.
If a Change of Control has occurred and the Employee is terminated from his
employment with the Company by reason of disability in accordance with Section
5(b) of the Employment Agreement, then all unvested Options, including those
which are the subject of this Agreement and any prior agreements between
Employee and the Company regarding stock options, shall automatically vest on
the effective date of such termination. All Options that have vested on or
prior to such date shall remain exercisable until the earlier to occur of (i)
the first anniversary of such date and (ii) the expiration of the Option Term.
(c) Death. If a Change of Control has not occurred and the Employee
-----
dies while employed by the Company, then all un-vested Options shall
automatically terminate and be canceled (without any action on the part of the
Company) on the date of death. If a
3
<PAGE>
Change of Control has occurred and the Employee dies while employed by the
Company, then all unvested Options, including those which are the subject of
this Agreement and any prior agreements between the Employee and the Company
regarding stock options, shall automatically vest on the date of death.
Following the Employee's death, his executors, administrators, legatees or
distributees may exercise the Options that have vested prior to the date of
death until the earlier to occur of (i) the first anniversary of such date and
(ii) the expiration of the Option Term.
(d) Other Terminations of Employment.
--------------------------------
(i) If the Employee's employment is terminated by the Employee other
than for Good Reason (as defined in the Employment Agreement), then all unvested
Options shall automatically terminate and be canceled (without any action on the
part of the Company) on the date of such termination. All Options that have
vested prior to such date shall remain exercisable until the earlier to occur of
(A) the ninetieth day following such date and (B) the expiration of the Option
Term.
(ii) If Employee's employment is terminated (A) other than for a
reason described in paragraphs (a), (b), or (c) above, or (B) by the Employee
validly for Good Reason and pursuant to Section 5(d) of the Employment
Agreement, then, as of the date of such termination, all the Options that have
not become vested on or prior to the date of such termination shall become
vested as of such date. All Options that have vested on or prior to such date
shall remain exercisable until the earliest to occur of (C) the ninetieth day
following such date and (D) the expiration of the Option Term.
(e) Termination Date. For purposes of Sections 5(a), (b), (d) and (f)
----------------
hereof, the date of termination of the Employee's employment shall be the Date
of Termination (as defined in the Employment Agreement).
(f) Extension After Certain Terminations. If the Employee's
------------------------------------
employment with the Company is terminated other than for a reason described in
paragraph (a), (b), (c) or (d) (i) above, and the Employee dies or becomes
disabled within ninety (90) days after such termination of employment, then the
Employee's executors, administrators, legatees or distributees may exercise the
Options, to the extent vested and exercisable as of the date of such
termination, until the earlier to occur of (i) the first anniversary of the date
of death or disability and (ii) the expiration of the Option Term.
6. CERTAIN ADJUSTMENTS. The number and kind of securities
--------------------
that may be purchased upon the exercise of the Options and the Exercise Price
shall be subject to adjust-
4
<PAGE>
ment from time to time upon the occurrence of any of the following events after
the date hereof:
(a) Recapitalization, Capital Reorganization, Reclassification,
-----------------------------------------------------------
Consolidation, Merger or Sale. In case of any recapitalization or capital
- -----------------------------
reorganization of the Company or any reclassification of the outstanding Common
Stock (other than a change in par value, or from par value to no par value, or
from no par value to par value or as a result of a subdivision or combination),
or in case of any consolidation or merger of the Company with or into another
corporation (other than a merger with another corporation in which the Company
is the surviving corporation and that does not result in any reclassification of
or change in the outstanding Common Stock (other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), or in case of any sale or transfer to
another corporation of the property of the Company as an entirety or
substantially as an entirety, the Employee shall thereafter have the right to
acquire upon exercise of the Options, in lieu of each share of Common Stock
thereto fore issuable upon exercise of the Options, the kind and amount of
shares of capital stock, other securities, money and/or property receivable in
respect of each share of Common Stock upon such recapitalization,
reorganization, reclassification, consolidation, merger, sale or transfer. The
provisions of this paragraph (a) shall similarly apply to successive
recapitalizations, reorganizations, reclassifications, consolidations, mergers,
sales and transfers.
(b) Subdivision or Combination of Shares. If the Company shall
------------------------------------
subdivide or combine its outstanding shares of Common Stock, (i) in case of
subdivision of shares, the Exercise Price shall be proportionately reduced (as
of the effective date of such subdivision, or, if the Company shall take a
record of holders of its Common Stock for the purpose of so subdividing, as of
the applicable record date, whichever is earlier) to reflect the increase in the
total number of shares of Common Stock outstanding as a result of such
subdivision, or (ii) in the case of a combination of shares, the Exercise Price
shall be proportionately increased (as of the effective date of such combination
or, if the Company shall take a record of holders of its Common Stock for the
purpose of so combining, as of the applicable record date, whichever is earlier)
to reflect the reduction in the total number of shares of Common Stock
outstanding as a result of such combination. In the event that an adjustment
pursuant to this paragraph (b) is made as of the record date for purposes of any
subdivision or combi nation and such subdivision or combination is not so made,
the Exercise Price shall again be adjusted to be the Exercise Price that would
then be in effect if such record date had not been fixed.
(c) Certain Dividends and Distributions. If the Company shall pay a
-----------------------------------
dividend
5
<PAGE>
on, or make any other distribution to the holders of, its outstanding Common
Stock in shares of its Common Stock, the Exercise Price shall be adjusted, as of
the date the Company shall take a record of the holders of Common Stock for the
purpose of receiving such dividend or other distribution (or if no such record
is taken, as of the date of such payment or other distri bution), to that price
determined by multiplying the Exercise Price in effect immediately prior to such
record date (or if no such record is taken, immediately prior to such payment or
other distribution), by a fraction (i) the numerator of which shall be the total
number of shares of Common Stock outstanding immediately prior to such dividend
or distribution, and (ii) the denominator of which shall be the total number of
shares of Common Stock outstanding immediately after such dividend or
distribution; provided, that if the foregoing adjustment is made to the Exercise
--------
Price as of a record date for such dividend or other distribution and such
dividend or distribution is not so paid or made, the Exercise Price shall again
be adjusted to be the Exercise Price that would then be in effect if such record
date had not been fixed.
(d) Adjustment of Number of Shares. Upon each adjustment and
------------------------------
readjustment of the Exercise Price pursuant to paragraph (b) or (c) of this
Section 6, the number of shares of Common Stock then issuable upon exercise of
the Options shall be adjusted, to the nearest 1/10th of a whole share, to the
product obtained by multiplying such number of shares issu able upon exercise
of the Options immediately prior to such adjustment in the Exercise Price by a
fraction, the numerator of which shall be the Exercise Price immediately prior
to such adjustment, and the denominator of which shall be the Exercise Price
immediately thereafter.
7. METHOD OF EXERCISE OF OPTIONS. (a) Subject to the terms
------------------------------
and conditions of this Agreement, the Options shall be exercisable by notice (an
"Exercise No tice") and payment to the Company in accordance with the procedure
set forth herein; provided, that the aggregate Exercise Price with respect to
--------
any one such exercise shall not be less than $10,000, unless such exercise
represents an exercise of all Options that are vested and exercisable as of the
date of such exercise. Partial shares may not be exercised. If the Employee
fails to accept delivery of and pay for all or any part of the number of shares
specified in the Exercise Notice upon tender or delivery thereof, his or her
right to exercise the Options with respect to such undelivered shares may be
terminated, in the sole discretion of the Committee.
(b) Each Exercise Notice shall: (i) state the number of shares in
respect of which the Options are being exercised, (ii) be accompanied by payment
as provided in paragraph (c) below, and (iii) be signed by the person or persons
entitled to exercise such Options. If such Options are being exercised by any
person or persons other than the Employee, the Exercise Notice shall be
accompanied by proof, satisfactory to the Company
6
<PAGE>
and its counsel, of the right of such person or persons to exercise such
Options.
(c) Subject to Section 11 hereof, payment of the Exercise Price and
estimated taxes and fees shall be made by delivering to the Company any one, or
a combination of, the following: (i) a certified or bank cashier's check payable
to the Company or its order, or a wire transfer directly to an account specified
by the Company, (ii) one or more certificates evidencing shares of Common Stock
owned by the Employee immediately prior to such exercise, together with a duly
executed stock power, having an aggregate Fair Market Value (as defined below)
on the date on which the Exercise Notice is given equal to the aggregate
Exercise Price and estimated taxes and fees or (iii) a copy of irrevocable
instructions to a registered broker/dealer to deliver promptly to the Company an
amount of proceeds from the sale of shares of Common Stock to be issued pursuant
to the Options being exercised or of a loan made with respect to shares of
Common Stock to be issued pursuant to the Options being exercised sufficient, in
either case, to pay the Exercise Price ("Cashless Exercise"). All exercise
instructions must be submitted by the Employee on designated company forms or
through designated Company computer programs (Company intranet processes).
(d) The certificate or certificates representing shares of Common
Stock to be issued upon exercise of the Options shall be registered in the name
of the person or persons exercising such Options (or, if such Options are
exercised by the Employee and if the Em ployee so requests in the applicable
Exercise Notice, shall be registered in the name of the Employee and his or her
spouse jointly, with right of survivorship) but only upon compliance with all
the provisions of this Agreement, and such certificate(s) shall be delivered
within 10 days after receipt of payment and completion of such compliance by the
Employee; provided, that in the case of clause (iii) of the first sentence of
--------
Section 7(c), the Company shall not be required to make delivery of the
certificate(s) until payment is actually received from such broker/dealer.
(e) The Company shall have no obligation to issue or deliver
fractional shares of Common Stock upon exercise of the Options but may, in its
sole discretion, elect to do so. In lieu of issuing any such fractional share,
the Company shall pay to the person exercising the Options, promptly following
such exercise, an amount in cash equal to the Fair Market Value of such fraction
of a share on the date of exercise. The "Fair Market Value" per share of Common
Stock as of any date of determination, shall mean (i) the closing sales price
per share of Common Stock on the national securities exchange on which such
stock is principally traded, on the next preceding date on which there was a
sale of such stock on such exchange, or (ii) if the shares of Common Stock are
not listed or admitted to trading on any such exchange, the closing price as
reported by the NASDAQ Stock Market for the last preceding date on which there
was a sale of such stock on such exchange, or (iii) if the shares
7
<PAGE>
of Common Stock are not then listed on a national securities exchange or on the
NASDAQ Stock Market, the average of the highest reported bid and lowest reported
asked prices for the shares of Common Stock as reported by the National
Association of Securities Dealers, Inc. Automated Quotations ("NASDAQ") system
for the last preceding date on which such bid and asked prices were reported, or
(iv) if the shares of Common Stock are not then listed on any securities
exchange or prices therefor are not then quoted in the NASDAQ system, such value
as determined in good faith by the Board (or any duly authorized committee
thereof).
8. NO RIGHT TO CONTINUED EMPLOYMENT. Nothing in this
---------------------------------
Agreement shall confer upon the Employee the right to continue in the employ of
the Company or to be entitled to any right or benefit not set forth in this
Agreement or to interfere with or limit in any way the right of the Company to
terminate the Employee's employment.
9. WITHHOLDING TAXES. The Company shall have the right to
------------------
require the Employee (or such other person, if any, who has the right to
exercise the Options) to pay to the Company in cash the amount of any federal,
state, local and foreign income and other taxes that the Company may be required
to withhold before delivering to the Employee (or such other person) a
certificate or certificates representing shares of Common Stock issuable
hereunder.
10. APPROVAL OF COUNSEL. Any exercise of the Options and the
-------------------
issuance and delivery of shares of Common Stock pursuant thereto shall be
subject to approval, by the Company's counsel, of all legal matters in
connection therewith, including compliance with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder, the
requirements of any stock exchange upon which the Common Stock may then be
listed and any applicable state securities or "blue sky" laws. The Employee
understands that, as of the date hereof, neither the Options nor the shares of
Common Stock issuable upon exercise of the Options have been registered under
the Securities Act or any applicable state securities or "blue sky" laws.
11. REGISTRATION RIGHTS. If the Company proposes to file a
-------------------
registration statement on Form S-8 (or any successor form for the registration
under the Securities Act of securities to be offered pursuant to employee
benefit plans) and such form then permits the registration thereunder of the
Common Stock underlying the Options, the Company shall include in such
registration the Common Stock underlying the Option, subject to then applicable
rules and regulations, in order to permit the public resale thereof by the
Employee. The registration rights set forth in this Section 12 shall apply only
to the extent that an effec-
8
<PAGE>
tive registration statement is then required for the public sale by the Employee
of the Common Stock underlying the Options.
12. NOTICES. For the purposes of this Agreement, notices,
-------
demands and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given (i) when hand delivered,
(ii) when sent, if sent by overnight mail, overnight courier or facsimile
transmission or (iii) (unless otherwise specified) when mailed by United States
registered mail, return receipt requested, postage prepaid, addressed as
follows:
Samsonite Corporation
11200 East Forty-Fifth Avenue
Denver, Colorado 80239-3018
c/o Chief Administrative Officer & Secretary
with a copy to each member of the Compensation Committee who is not an officer
or an em ployee of the Company, at the Company's address, or to such other
address as any party may have furnished to the others in writing in accordance
herewith, except that notices of change of address shall be effective only upon
receipt.
All notices to the Employee or other person or persons then entitled
to exercise the Options shall be addressed to the Employee or such other person
or persons at the then current address of the Employee contained in the employee
payroll records of the Company.
Anyone to whom a notice may be given under this Agreement
may designate a new address by notice to that effect.
13. BENEFITS OF AGREEMENT. This Agreement shall inure to the
----------------------
benefit of and be binding upon each successor and assign of the Company. All
obligations imposed upon the Employee and all rights granted to the Company
under this Agreement shall be binding upon the Employee and, to the limited
extent set forth herein, the Employee's heirs, legal representatives and
successors. No other person shall have any rights under this Agreement.
14. SEVERABILITY. If any one or more provisions of this
-------------
Agreement is deemed to be illegal or unenforceable, such illegality or un-
enforceability shall not affect the validity or enforceability of the remaining
legal and enforceable provisions herein, which shall be construed as if such
illegal or unenforceable provision or provisions had not been inserted.
9
<PAGE>
15. ENTIRE AGREEMENT. This Agreement contains the entire
-----------------
understanding and agreement between the parties hereto, and supersedes all prior
understandings and agree ments between them respecting the subject matter
hereof. The provisions of this Agreement may not be modified, waived nor
discharged unless such waiver, modification or discharge is agreed to in
writing, signed by the parties hereto.
16. WAIVER. No waiver by either party hereto, at any time,
-------
of any breach by the other party of, or compliance with, any condition or
provision of this Agreement to be performed by such other party, shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time.
17. GOVERNING LAW. This Agreement shall be construed and
-------------
governed in accordance with the laws of the State of New York, without regard to
the conflicts of law principles thereof.
18. INCORPORATION BY REFERENCE. The incorporation herein of any
---------------------------
terms, by reference to another document, shall not be affected by the
termination of any agreement contained in such other document, nor by the
invalidity of any provision thereof.
19. TIME PERIODS. Any action required to be taken under this
-------------
Agreement within a certain number of days shall be taken within that number of
calendar days; provided, that if the last day for taking such action falls on a
--------
weekend or a holiday, the period during which such action may be taken shall be
automatically extended to the next business day.
20. COUNTERPARTS. This Agreement may be executed in
-------------
counterparts, each of which shall be deemed to be an original, but both of which
together shall constitute one and the same instrument.
21. MISCELLANEOUS. Employee agrees to abide by the laws and
--------------
regulations governing Insider Trading, the terms of this Stock Option Agreement,
and the policies and decisions of the management of the Company in all matters
concerning this stock option grant of January 16, 1997 and acknowledges receipt
of the following documents:
Received Documents:
a. Stock Option Agreement
b. Stock Option Questions & Answers
c. Avoiding Insider Trading Brochure
10
<PAGE>
UNDERSTOOD AND AGREED TO:
Employee:
/s/ GARY ERVICK
- ----------------------------------------------------------------
(Signature)
SAMSONITE CORPORATION
By: /s/ JOHN MURTAGH
-------------------------------------------------------------
Name: John Murtagh
Title: Chief Administrative Officer & Secretary
11
<PAGE>
EXHIBIT 10.49
-------------
NONQUALIFIED
STOCK OPTION AGREEMENT
----------------------
This Agreement, effective as of the 29th day of OCTOBER,
1996, is made by and between Samsonite Corporation, a Delaware corporation (the
"Company"), and FIELD(1) (the "Employee").
The Company desires to grant to the Employee a right to acquire shares
of common stock, par value $.01 per share of the Company ("Common Stock"),
according to the terms and conditions provided herein and thereby provide
additional incentives to the Employee to increase the long-term value of the
Company and further align his interests with those of the stockholders of the
Company.
In consideration of the promises and covenants contained in this
Agreement, and other good and valuable consideration, the Company and the
Employee hereby agree as follows:
1. CONFIRMATION OF GRANT OF OPTION. Pursuant to a
--------------------------------
determination by the Compensation Committee of the Board of Directors of the
Company (the "Committee"), on OCTOBER 29, 1996 and pursuant to the Company's
1995 Stock Option and Incentive Award Plan, the Company, subject to the terms
and conditions of this Agree ment, hereby confirms that the Employee has been
granted, effective OCTOBER 29, 1996 (the "Date of Grant"), as a matter of
separate inducement and agreement, and in addition to and not in lieu of salary
or other compensation for services, the right to purchase from the Company an
aggregate of FIELD(2) shares of Common Stock (the "Options"). The Options shall
vest as provided in Section 4 hereof and shall be subject to adjustment as
provided in Section 6 hereof.
<PAGE>
2. EXERCISE PRICE. The initial exercise price per
---------------
share (the "Exercise Price") for the Options shall be $35.50.
3. NON-TRANSFERABILITY OF OPTIONS. The Options may not
-------------------------------
be as signed, transferred or otherwise disposed of, or pledged or hypothecated
in any way, and shall not be subject to execution, attachment or other process
otherwise than by will or by the laws of descent and distribution. The Options
may be exercised during the lifetime of the Employee only by the Employee.
4. TERM AND EXERCISE OF OPTIONS. The Options shall
-----------------------------
remain outstanding (subject to the vesting and exercisability provisions
provided herein) for a period of ten (10) years beginning on the Date of Grant
(the "Option Term"). Twenty percent (20.0%) of the Options shall vest on each
anniversary date of this grant in the years 1997,1998, 1999, 2000 and 2001, so
long as the Employee remains continually employed by the Company from the
effective date of this Agreement through such date of vesting. Except as
otherwise provided in Section 5 hereof, Options that have vested shall remain
exercisable in whole or in part at any time, and from time to time, until the
earlier to occur of the expira tion of the Option Term and the expiration of
ninety (90) days after the date of the termina tion of the Employee's
employment with the Company. The Employee shall not have any right to dividends
or any other rights of a stockholder of the Company with respect to any shares
of Common Stock underlying the Options until such shares have been issued to him
or her upon the exercise of the Options.
5. TERMINATION. The Employee's rights with respect to
------------
the Options upon termination of his or her employment with the Company or death
are as follows:
(a) Cause. If the Employee is terminated from employment with the
-----
Company for Cause (as defined below), then all the Options (whether vested or
un-vested) shall automatically terminate and be canceled (without any action on
the part of the Company) on the date upon which notice (as described below) is
given to the Employee, provided that the Employee's employment is thereafter
terminated.
For purposes of this Agreement, the Company shall have "Cause" to
terminate the Employee's employment upon (A) the engaging by the Employee in
willful misconduct that is materially injurious to the Company, (B) the
embezzlement or misappropriation of funds or property of the Company or its
subsidiaries by the Employee or the conviction of the Employee of a felony or
the entrance of a plea of guilty, or nolo contendere by the Employee to a felony
or (C) the willful failure or refusal by the Employee to substantially
2
<PAGE>
perform his or her duties or responsibilities, which failure continues after
being brought to the attention of the Employee (other than any such failure
resulting from the Employee's incapacity due to Disability). For purposes of
this paragraph, no act, or failure to act, on the Employee's part, shall be
considered "willful" unless done or omitted to be done by him or her, not in
good faith, and without reasonable belief that his action or omission was in the
best interest of the Company. Determination of Cause shall be made by the
Company in its sole discretion. Any such determination shall be final and
binding on the Employee. The Employee will be provided promptly with the facts
and circumstances which form the basis for termination for Cause, set forth in
reasonable detail, in writing.
(b) Disability. If the Employee is terminated from his or her
----------
employment with the Company by reason of disability (as defined below), then all
unvested Options shall auto matically terminate and be canceled (without any
action on the part of the Company) on the effective date of such termination.
All Options that have vested prior to such date shall remain exercisable until
the earlier to occur of (i) the first anniversary of such date and (ii) the
expiration of the Option Term.
For purposes of this Agreement, "disability" shall mean that the
Company determines in good faith, based upon medical evidence acceptable to it,
that the Employee has become physically or mentally disabled or incapacitated
for a continuous period of ninety (90) days to such an extent that he is unable
to perform the essential functions of his job.
(c) Death. If the Employee dies while employed by the Company, then
-----
all un-vested Options shall automatically terminate and be canceled (without any
action on the part of the Company) on the date of death. Following the
Employee's death, his executors, administrators, legatees or distributees may
exercise the Options that have vested prior to the date of death until the
earlier to occur of (i) the first anniversary of such date and (ii) the
expiration of the Option Term.
(d) Change of Control. If the Employee is terminated after a Change
-----------------
of Control (as defined below) has occurred for any reason other than for Cause
as defined herein, or for failure to perform his or her duties and
responsibilities at the level reasonably expected for the Employee's position,
and consistent with expectations applied to the Employee prior to the Change of
Control, any and all unvested options shall immediately vest, and all vested
options, whether vesting prior to or upon such date, shall remain exercisable
until the earlier to occur of (i) the ninetieth day following the date of such
termination and (ii) the expiration of the Option Term. Change of Control means
(i) any sale, transfer or other conveyance (whether directly, or through a
merger, consolidation or similar transaction), or series of related sales,
transfers, or other conveyances, of the outstanding
3
<PAGE>
capital stock of the Company pursuant to which any person (or group of
affiliated persons) other than an Excluded Person, becomes the beneficial owner
of more than 50% of the outstanding Common Stock or (ii) any sale, transfer or
other conveyance of all or substantially all of the Company assets to any person
(or group of affiliated persons) other than to an Excluded Person. For the
purposes of the foregoing definition, "Excluded Person" means and includes (A)
Apollo Investment Fund, L.P. ("Apollo"), any of its affiliates, and, so long as
Apollo or an affiliate of Apollo controls the right to vote the securities in
question, any partner, shareholder or trustee of any of them, (B) any
corporation owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company
and (C) the Company or any subsidiary of the Company.
(e) Other Terminations of Employment. If the Employee's employment
--------------------------------
with the Company is terminated other than for a reason described in paragraph
(a), (b) (c) or (d) above, then all unvested Options shall automatically
terminate and be canceled (without any action on the part of the Company) on the
date of such termination. All Options which have vested prior to such date
shall remain exercisable until the earlier to occur of (i) the ninetieth day
following such date and (ii) the expiration of the Option Term.
(f) Extension After Certain Terminations. If the Employee's
------------------------------------
employment with the Company is terminated other than for a reason described in
paragraph (a), (b) (c) or (d) above, and the Employee dies or becomes disabled
within ninety (90) days after such termi nation of employment, then the
Employee's executors, administrators, legatees or distributees may exercise the
Options, to the extent vested and exercisable as of the date of such termina
tion, until the earlier to occur of (i) the first anniversary of the date of
death or disability and (ii) the expiration of the Option Term.
6. CERTAIN ADJUSTMENTS. The number and kind of
--------------------
securities that may be purchased upon the exercise of the Options and the
Exercise Price shall be subject to ad justment from time to time upon the
occurrence of any of the following events after the date hereof:
(a) Recapitalization, Capital Reorganization, Reclassification,
-----------------------------------------------------------
Consolidation, Merger or Sale. In case of any recapitalization or capital
- -----------------------------
reorganization of the Company or any reclassification of the outstanding Common
Stock (other than a change in par value, or from par value to no par value, or
from no par value to par value or as a result of a subdivision or combination),
or in case of any consolidation or merger of the Company with or into another
corporation (other than a merger with another corporation in which the Company
is the surviving corporation and that does not result in any reclassifi cation
of or change in the outstanding Common Stock (other than a change in par value,
or
4
<PAGE>
from par value to no par value, or from no par value to par value, or as a
result of a subdivi sion or combination), or in case of any sale or transfer to
another corporation of the property of the Company as an entirety or
substantially as an entirety, the Employee shall thereafter have the right to
acquire upon exercise of the Options, in lieu of each share of Common Stock
theretofore issuable upon exercise of the Options, the kind and amount of shares
of capital stock, other securities, money and/or property receivable in respect
of each share of Common Stock upon such recapitalization, reorganization,
reclassification, consolidation, merger, sale or transfer. The provisions of
this paragraph (a) shall similarly apply to succes sive recapitalizations,
reorganizations, reclassifications, consolidations, mergers, sales and
transfers.
(b) Subdivision or Combination of Shares. If the Company shall
------------------------------------
subdivide or combine its outstanding shares of Common Stock, (i) in case of
subdivision of shares, the Exercise Price shall be proportionately reduced (as
of the effective date of such subdivision, or, if the Company shall take a
record of holders of its Common Stock for the purpose of so subdividing, as of
the applicable record date, whichever is earlier) to reflect the increase in the
total number of shares of Common Stock outstanding as a result of such
subdivision, or (ii) in the case of a combination of shares, the Exercise Price
shall be proportionately increased (as of the effective date of such combination
or, if the Company shall take a record of holders of its Common Stock for the
purpose of so combining, as of the applicable record date, whichever is earlier)
to reflect the reduction in the total number of shares of Common Stock
outstanding as a result of such combination. In the event that an adjustment
pursuant to this paragraph (b) is made as of the record date for purposes of any
subdivision or combi nation and such subdivision or combination is not so made,
the Exercise Price shall again be adjusted to be the Exercise Price that would
then be in effect if such record date had not been fixed.
(c) Certain Dividends and Distributions. If the Company shall pay a
-----------------------------------
dividend on, or make any other distribution to the holders of, its outstanding
Common Stock in shares of its Common Stock, the Exercise Price shall be
adjusted, as of the date the Company shall take a record of the holders of
Common Stock for the purpose of receiving such dividend or other distribution
(or if no such record is taken, as of the date of such payment or other
distribution), to that price determined by multiplying the Exercise Price in
effect immediately prior to such record date (or if no such record is taken,
immediately prior to such payment or other distribution), by a fraction (i) the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution, and (ii) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution; provided, that if
--------
the foregoing adjustment is made to the Exercise Price as of a record date for
such
5
<PAGE>
dividend or other distribution and such dividend or distribution is not so
paid or made, the Exercise Price shall again be adjusted to be the Exercise
Price that would then be in effect if such record date had not been fixed.
(d) Adjustment of Number of Shares. Upon each adjustment and
------------------------------
readjustment of the Exercise Price pursuant to paragraph (b) or (c) of this
Section 6, the number of shares of Common Stock then issuable upon exercise of
the Options shall be adjusted, to the nearest 1/10th of a whole share, to the
product obtained by multiplying such number of shares issuable upon exercise of
the Options immediately prior to such adjustment in the Exercise Price by a
fraction, the numerator of which shall be the Exercise Price imme diately prior
to such adjustment, and the denominator of which shall be the Exercise Price
immediately thereafter.
7. METHOD OF EXERCISE OF OPTIONS. (a) Subject to the
------------------------------
terms and conditions of this Agreement, the Options shall be exercisable by
notice (an "Exercise No tice") and payment to the Company in accordance with
the procedure set forth herein; provided, that the aggregate Exercise Price with
--------
respect to any one such exercise shall not be less than $10,000, unless such
exercise represents an exercise of all Options that are vested and exercisable
as of the date of such exercise. Partial shares may not be exercised. If the
Employee fails to accept delivery of and pay for all or any part of the number
of shares specified in the Exercise Notice upon tender or delivery thereof, his
or her right to exercise the Options with respect to such undelivered shares may
be terminated, in the sole discretion of the Committee.
(b) Each Exercise Notice shall: (i) state the number of shares in
respect of which the Options are being exercised, (ii) be accompanied by payment
as provided in paragraph (c) below, and (iii) be signed by the person or persons
entitled to exercise such Options. If such Options are being exercised by any
person or persons other than the Employee, the Exercise Notice shall be
accompanied by proof, satisfactory to the Company and its counsel, of the right
of such person or persons to exercise such Options.
(c) Subject to Section 11 hereof, payment of the Exercise Price and
estimated taxes and fees shall be made by delivering to the Company any one, or
a combination of, the following: (i) a certified or bank cashier's check payable
to the Company or its order, or a wire transfer directly to an account specified
by the Company, (ii) one or more certificates evidencing shares of Common Stock
owned by the Employee immediately prior to such exercise, together with a duly
executed stock power, having an aggregate Fair Market Value (as defined below)
on the date on which the Exercise Notice is given equal to the aggregate
Exercise Price and estimated taxes and fees or (iii) a copy of irrevocable
instructions to a
6
<PAGE>
registered broker/dealer to deliver promptly to the Company an amount of
proceeds from the sale of shares of Common Stock to be issued pursuant to the
Options being exercised or of a loan made with respect to shares of Common Stock
to be issued pursuant to the Options being exercised sufficient, in either case,
to pay the Exercise Price ("Cashless Exercise"). All exercise instructions must
be submitted by the Employee on designated company forms or through designated
Company computer programs (Company intranet processes).
(d) The certificate or certificates representing shares of Common
Stock to be issued upon exercise of the Options shall be registered in the name
of the person or persons exercising such Options (or, if such Options are
exercised by the Employee and if the Em ployee so requests in the applicable
Exercise Notice, shall be registered in the name of the Employee and his or her
spouse jointly, with right of survivorship) but only upon compliance with all
the provisions of this Agreement, and such certificate(s) shall be delivered
within 10 days after receipt of payment and completion of such compliance by the
Employee; provided, that in the case of clause (iii) of the first sentence of
--------
Section 7(c), the Company shall not be required to make delivery of the
certificate(s) until payment is actually received from such broker/dealer.
(e) The Company shall have no obligation to issue or deliver
fractional shares of Common Stock upon exercise of the Options but may, in its
sole discretion, elect to do so. In lieu of issuing any such fractional share,
the Company shall pay to the person exercising the Options, promptly following
such exercise, an amount in cash equal to the Fair Market Value of such fraction
of a share on the date of exercise. The "Fair Market Value" per share of Common
Stock as of any date of determination, shall mean (i) the closing sales price
per share of Common Stock on the national securities exchange on which such
stock is principally traded, on the next preceding date on which there was a
sale of such stock on such exchange, or (ii) if the shares of Common Stock are
not listed or admitted to trading on any such exchange, the closing price as
reported by the NASDAQ Stock Market for the last preceding date on which there
was a sale of such stock on such exchange, or (iii) if the shares of Common
Stock are not then listed on a national securities exchange or on the NASDAQ
Stock Market, the average of the highest reported bid and lowest reported asked
prices for the shares of Common Stock as reported by the National Association of
Securities Dealers, Inc. Automated Quotations ("NASDAQ") system for the last
preceding date on which such bid and asked prices were reported, or (iv) if the
shares of Common Stock are not then listed on any securities exchange or prices
therefor are not then quoted in the NASDAQ system, such value as determined in
good faith by the Board (or any duly authorized committee thereof).
8. NO RIGHT TO CONTINUED EMPLOYMENT. Nothing in this
---------------------------------
Agreement
7
<PAGE>
shall confer upon the Employee the right to continue in the employ of
the Company or to be entitled to any right or benefit not set forth in this
Agreement or to interfere with or limit in any way the right of the Company to
terminate the Employee's employment.
9. WITHHOLDING TAXES. The Company shall have the right
------------------
to require the Employee (or such other person, if any, who has the right to
exercise the Options) to pay to the Company in cash the amount of any federal,
state, local and foreign income and other taxes that the Company may be required
to withhold before delivering to the Employee (or such other person) a
certificate or certificates representing shares of Common Stock issuable
hereunder.
10. APPROVAL OF COUNSEL. Any exercise of the Options
-------------------
and the issuance and delivery of shares of Common Stock pursuant thereto shall
be subject to approval, by the Company's counsel, of all legal matters in
connection therewith, including compliance with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder, the
requirements of any stock exchange upon which the Common Stock may then be
listed and any applicable state securities or "blue sky" laws. The Employee
understands that, as of the date hereof, neither the Options nor the shares of
Common Stock issuable upon exercise of the Options have been registered under
the Securities Act or any applicable state securities or "blue sky" laws.
11. REGISTRATION RIGHTS. If the Company proposes to
-------------------
file a registration statement on Form S-8 (or any successor form for the
registration under the Securities Act of securities to be offered pursuant to
employee benefit plans) and such form then permits the registration thereunder
of the Common Stock underlying the Options, the Company shall include in such
registration the Common Stock underlying the Option, subject to then applicable
rules and regulations, in order to permit the public resale thereof by the
Employee. The registration rights set forth in this Section 12 shall apply only
to the extent that an effec tive registration statement is then required for
the public sale by the Employee of the Common Stock underlying the Options.
12. NON-COMPETITION. Employee agrees that during
----------------
employment with the Company, and for a period of one year thereafter, Employee
shall not, directly or indirectly, as a principal, officer, director, employee,
or in any other capacity whatsoever, without prior written consent of the
Company, engage in any activity with, or provide services to, any person or
entity engaged in, or about to engage in, any business activity that is
competitive with the business then engaged in by Samsonite, in the geographic
areas within which Employee's work has been concerned during the twelve months
preceding the
8
<PAGE>
termination Employee's employment with the Company.
However, nothing in this Agreement shall prevent Employee from making
or holding any investment in any amount in securities of a competitive business
traded on a national securities exchange or traded in the over the counter
market, provided said investments do not exceed one percent (1%) of the issued
and outstanding stock of any such competitive business.
Employee acknowledges and agrees that (1) breach of this Section 12 is
appropriately remedied by injunctive relief, including interim or temporary
relief, and Employee hereby consents thereto; and (2) the Company may refuse to
allow the exercise of any otherwise vested Options in the event of an alleged
breach by Employee of this Section 12, and such Options shall be terminated and
canceled upon determination of such breach; and (3) the Company is not liable
for the gain or loss by the Employee due to the increase or decrease of the Fair
Market Value of the Company stock during the period in which the Company may
have refused to accept exercise instructions pending final determination of the
Employee's breach of this Agreement.
13. NOTICES. For the purposes of this Agreement, notices,
-------
demands and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given (i) when hand delivered,
(ii) when sent, if sent by overnight mail, over night courier or facsimile
transmission or (iii) (unless otherwise specified) when mailed by United States
registered mail, return receipt requested, postage prepaid, addressed as
follows:
Samsonite Corporation
11200 East Forty-Fifth Avenue
Denver, Colorado 80239-3018
c/o Chief Administrative Officer & Secretary
with a copy to each member of the Compensation Committee who is not an officer
or an em ployee of the Company, at the Company's address, or to such other
address as any party may have furnished to the others in writing in accordance
herewith, except that notices of change of address shall be effective only upon
receipt.
All notices to the Employee or other person or persons then entitled
to exercise the Options shall be addressed to the Employee or such other person
or persons at the then current address of the Employee contained in the employee
payroll records of the Company.
Anyone to whom a notice may be given under this Agreement
may designate
9
<PAGE>
a new address by notice to that effect.
14. BENEFITS OF AGREEMENT. This Agreement shall inure
----------------------
to the benefit of and be binding upon each successor and assign of the Company.
All obligations imposed upon the Employee and all rights granted to the Company
under this Agreement shall be binding upon the Employee and, to the limited
extent set forth herein, the Employee's heirs, legal representatives and
successors. No other person shall have any rights under this Agreement.
10
<PAGE>
15. SEVERABILITY. If any one or more provisions of this
-------------
Agreement is deemed to be illegal or unenforceable, such illegality or un-
enforceability shall not affect the validity or enforceability of the remaining
legal and enforceable provisions herein, which shall be construed as if such
illegal or unenforceable provision or provisions had not been inserted.
16. ENTIRE AGREEMENT. This Agreement contains the
-----------------
entire understand ing and agreement between the parties hereto, and supersedes
all prior understandings and agreements between them respecting the subject
matter hereof. The provisions of this Agree ment may not be modified, waived
nor discharged unless such waiver, modification or dis charge is agreed to in
writing, signed by the parties hereto.
17. WAIVER. No waiver by either party hereto, at any
-------
time, of any breach by the other party of, or compliance with, any condition or
provision of this Agreement to be performed by such other party, shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time.
18. GOVERNING LAW. This Agreement shall be construed
-------------
and governed in accordance with the laws of the State of New York, without
regard to the conflicts of law principles thereof.
19. INCORPORATION BY REFERENCE. The incorporation
---------------------------
herein of any terms, by reference to another document, shall not be affected by
the termination of any agreement contained in such other document, nor by the
invalidity of any provision thereof.
20. TIME PERIODS. Any action required to be taken under
-------------
this Agreement within a certain number of days shall be taken within that number
of calendar days; provided, that if the last day for taking such action falls on
--------
a weekend or a holiday, the period during which such action may be taken shall
be automatically extended to the next business day.
21. COUNTERPARTS. This Agreement may be executed in
-------------
counterparts, each of which shall be deemed to be an original, but both of which
together shall constitute one and the same instrument.
22. MISCELLANEOUS. Employee agrees to abide by the laws
--------------
and regulations governing Insider Trading, the terms of this Stock Option
Agreement, and the
11
<PAGE>
policies and decisions of the management of the Company in all matters
concerning this stock option grant of October 29, 1996, and acknowledges receipt
of the following documents:
Received Documents:
a. Stock Option Agreement
b. Stock Option Questions & Answers
c. Avoiding Insider Trading Brochure
UNDERSTOOD AND AGREED TO:
Employee:
- -----------------------------------------
(Signature)
SAMSONITE CORPORATION
By:______________________________________
Name: John Murtagh
Title: Chief Administrative Officer & Secretary
12
<PAGE>
EXHIBIT 21
----------
SUBSIDIARIES OF SAMSONITE CORPORATION (Delaware)
Samsonite Europe N.V. Belgium
Samsonite S.A. France
Samsonite Limited United Kingdom
Samsonite B.V. Netherlands
Samsonite Ges.m.b.H. Austria
Samsonite GmbH Germany
Samsonite-Hungaria Luggage Ltd. Hungary
Samsonite Finanziaria S.r.l. Italy
Samsonite Italia S.r.l. Italy
Saturn & Saturn S.r.l. Italy
Bogey S.r.l. Italy
Samsonite Espana S.A. Spain
Samsonite AB (Aktiebolag) Sweden
Samsonite A/S Denmark
Samsonite AG Switzerland
Samsonite Latinoamerica, S.A. de C.V. Mexico
Samsonite Mexico, S.A. de C.V. Mexico
Samsonite Comercio E Participacoes Ltda. Brazil
Samsonite Industrial E Comercial Ltda. Brazil
Samsonite Canada Inc. Canada
Samson S.A. de C.V. Mexico
Samsonite Mauritius Limited Mauritius
Samsonite India Private Limited India
Samsonite Singapore Pte Ltd Singapore
Samsonite Asia Limited Hong Kong
Samsonite Mercosur Limited Bahamas
Samsonite Brasil Ltda. Brazil
A.T. Retail, Inc. Indiana
Samsonite Pacific Ltd. Colorado
Direct Marketing Ventures, Inc. Colorado
Legacy Luggage Inc. Colorado
Samsonite Service Corporation Colorado
Astrum R.E. Corp. Delaware
KBBL Inc. Delaware
McGregor Corporation New York
Hortex Incorporated Texas
Gilead Manufacturing Corporation Rhode Island
Jody Apparel, Inc. New York
WMI, Inc. Delaware
Wonderknit Corporation New York
McGregor China Corp. Delaware
Bernhard Altmann (CA) Ltd. Canada
<PAGE>
EXHIBIT 23
----------
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
THE BOARD OF DIRECTORS AND STOCKHOLDERS
SAMSONITE CORPORATION:
We consent to incorporation by reference in the registration statements on Form
S-8 (Nos. 333-05467, 333-19281, and 333-20775) of Samsonite Corporation of our
report dated March 18, 1997 relating to the consolidated balance sheets of
Samsonite Corporation and subsidiaries as of January 31, 1997 and 1996, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the years in the three-year period ended January 31, 1997,
which report appears in the January 31, 1997 Annual Report on Form 10-K of
Samsonite Corporation.
KPMG PEAT MARWICK LLP
Denver, Colorado
April 10, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AS LISTED IN THE INDEX ON PAGE F-1 INCLUDED IN
THE 1997 FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> FEB-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 9,343
<SECURITIES> 0
<RECEIVABLES> 90,707
<ALLOWANCES> 7,431
<INVENTORY> 135,071
<CURRENT-ASSETS> 295,114
<PP&E> 197,760
<DEPRECIATION> 53,801
<TOTAL-ASSETS> 592,658
<CURRENT-LIABILITIES> 189,719
<BONDS> 267,755
0
0
<COMMON> 160
<OTHER-SE> 24,838
<TOTAL-LIABILITY-AND-EQUITY> 592,658
<SALES> 741,138
<TOTAL-REVENUES> 741,138
<CGS> 449,333
<TOTAL-COSTS> 449,333
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,815
<INTEREST-EXPENSE> 35,670
<INCOME-PRETAX> 107
<INCOME-TAX> 10,389
<INCOME-CONTINUING> (11,323)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,323)
<EPS-PRIMARY> (.71)
<EPS-DILUTED> (.71)
</TABLE>
